Telstra: once bitten, twice ... why not?

Telstra: once bitten, twice ... why not?

Summary: The mobile market in India, I recently learned, is racing towards 300 million -- and doing so at a rate of 8.77 million new subscribers per month, according to the latest government figures.

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The mobile market in India, I recently learned, is racing towards 300 million -- and doing so at a rate of 8.77 million new subscribers per month, according to the latest government figures.

That's per month. Three months from now, India will have more new mobile subscribers than we have people in Australia. Thailand's mobile market is growing at 20 percent annually and its broadband demand at 100 percent. China Mobile added 53.2 million customers in 2006 and has now passed the 300 million subscriber mark -- an average of 4.43 million new customers monthly.

This kind of growth is what happens when carriers tap into fast-growth markets where ever-expanding mobile networks are connecting more people than ever before. New broadband Internet services are being snapped up with equal enthusiasm: Vietnam's Internet user base, for example, grew 60 percent between 2006 and 2007, hitting the 17 million user mark.

Why in the world isn't Telstra, whose executives love reminding us how their every breath is dedicated to increasing shareholder value, getting in on this?

The answer probably lies in Telstra's failed venture with Hong Kong carrier Pacific Century CyberWorks (PCCW), which tied up Telstra in the Reach undersea cable venture -- a colossal failure that painted more than AU$1 billion across Telstra's books in big, bright, red letters.

Shareholders were understandably unimpressed -- and that experience seems to have cast a pallor over Telstra that apparently remains to this day.

Score one for investment prudence, but one would think that a company growing as slowly as Telstra is -- revenues have only increased from AU$20.2 billion in 2002 to AU$22.75 billion last year, an annual growth rate of just 2.41 percent -- would be eager to tap into new revenue streams.

Right now, Telstra's overseas investments include New Zealand subsidiary TelstraClear, Hong Kong mobile provider CSL New World, and a mixed portfolio that generated AU$1.6 billion -- most of which came from TelstraClear -- that at 8.4 percent growth was Telstra's fastest-growing segment.

Heck, smaller companies like m2m Corporation are doing it: m2m recently signed a reseller agreement with Vietnam Multimedia Corporation, an ISP that has five million subscribers and will pay m2m subsidiary Profit Way Technology (PWT) a fee per subscriber to sell VoIP and related services in that country. m2m is on the investment warpath, having pursued similar agreements in Singapore, Hong Kong, China and Australia.

Why can m2m do it and Telstra can't? Telstra does have Australia's richest base of technical expertise, and Australian technologists are well respected right across Asia.

Since there are three billion people within 12 hours' flight of Sydney and many of them still don't have phones or Internet connections, bringing that technology overseas would seem to be like shooting fish in a barrel.

Doing this, however, would force Telstra to redirect its precious profits -- which dropped from AU$6.1 billion in 2005 to AU$4.6 billion in 2006 and only just edged up slightly in its most recent set of results -- away from providing dividends, which keep shareholders happy, and into its AU$4.5 billion in cash reserves, which will give it clout in negotiating overseas partnerships.

So far, its limited exposure to Asia, and lack of exposure outside of Hong Kong's oversaturated mobile market suggests an almost unhealthy level of risk aversion.

When Telstra does look outwards, it is with blinkers on. The company loves to argue that it has the largest, fastest mobile network in the world, which may be true now but demonstrations at the recent GSMA World Mobile Congress -- where 60Mbps LTE (Long Term Evolution) technology was demonstrated to eager attendees -- suggest Telstra's lead may be ephemeral.

Perhaps most interesting is how Telstra is distracting attention from the Asian opportunities in which it is not investing. Telstra's results compare its 12.5 percent mobile services annual revenue growth with lower growth rates for carriers in the UK, Spain, France, Italy, and Japan; nary an Asian rival is listed.

Neither is Deutsche Telekom, a massive carrier that operates in 11 countries, and whose mobile business -- which at 20.7 billion euros (AU$35.3 billion) brings in more money than all of Telstra's businesses combined -- grew 12.2 percent from 2006 to 2007. Expect this to increase after Deutsche Telekom this week took a 20 percent interest in Greece's Hellenic Telecom (OTE), which itself has invested heavily in Bulgaria, Macedonia, Romania, and Albania.

Successful or not, what do European carriers have to do with the Australian mobile market? Why isn't Telstra comparing its growth with that of India's Reliance Telecommunications, which has 41 million mobile subscribers and grew revenues by 7.4 percent quarter-on-quarter? Or Bharti Airtel, which has more than 50 million subscribers and still grew mobile revenues by 59 percent between fiscal 2006 and 2007?

India, like many other countries in Asia, is far behind Australia in terms of 3G rollouts; Telstra could create massive opportunities by bringing a Next G equivalent to Thailand, Taiwan, Cambodia, Indonesia, India, Pakistan, or other up-and-coming countries near here.

Such a service could support both mobile telephony and fixed line-equivalent broadband, killing two birds with one stone and linking Telstra's future to that of Asian telecommunications.

Consider also that Telstra built the whole of Next G across a country the size of Australia for just AU$1.1 billion; would it really cost much to replicate this in, say, Vietnam, which has four times as many people and an increasingly tech-savvy population?

Instead, Telstra is focusing on its Australian infrastructure, then using it to milk Australian customers for all they're worth. Despite being fully privatised, the company's strategy is so narrowly focused on this country that it's still acting like a government body.

Lest this be misinterpreted as a missive that's unfairly targeting Telstra, let me point out that all of Australia's other major telcos -- Optus, Vodafone, Primus, and 3 -- are subsidiaries of overseas companies that have already looked offshore and found steady sources of revenue in the Australian market. I can't criticise their lack of overseas investment because none of them would be in this market if it weren't for overseas investment.

As Australia's only locally-controlled major telecoms provider, Telstra is in a unique position to make moves in Asia. But as long as Telstra's management team seems bent on litigating its way to local market domination, such vision will have to be left to others.

Is Telstra playing it smart, or is its fear of getting burnt again causing it to miss out on opportunities? Does Telstra's biggest growth potential lie in Australia or outside?

Topics: Telcos, Mobility, Optus, Telstra, Asean, India, Tech Industry

About

Australia’s first-world economy relies on first-rate IT and telecommunications innovation. David Braue, an award-winning IT journalist and former Macworld editor, covers its challenges, successes and lessons learned as it uses ICT to assert its leadership in the developing Asia-Pacific region – and strengthen its reputation on the world stage.

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17 comments
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  • Mobile Services in India

    India's first mobile network was set up in the city of Calcutta (now known as Kolkatta) by a company called Modi TELSTRA. They sold the network to Spice Telecom who in turned sold it to AirTel (a company that SingTel, the owners of Optus, have a 30% share in).

    On the topic of installing a Next G network in an asian country like India, the sad story there is that mobile carriers don't have enough spectrum to support a 3G network on the 850mhz or 900mhz bands.

    Carriers in India are crying out for more spectrum, however the government can't release any more spectrum since the military is using it. Hopefully their government can get their act together to free up more spectrum for mobile broadband use.
    anonymous
  • Telstra in India

    Ohh no!. Please keep the big bad bear out of india!. We are doing better of with one monolithic white elephant called BSNL !. We don't need another one!
    anonymous
  • Only just learned this>??????

    Crikey - where has your reaserch been conducted then???

    Its a suprise to you that the India telecoms market is growing so fast???

    This is probably because you only read your own drivell and not that of the the other IT/Comms sector on-line info sources.

    Seems like the Moonsters lack of research capability extends to another ZDNet scribbler.
    anonymous
  • More competition required

    If Telstra is not interested in Asia then maybe some of the overseas Telcos (doing well in Asia) could expand to Australia and shake Telstra up then!
    anonymous
  • It's not really Telstra

    Ericsson built NextG for Telstra in 10 months. It's Ericsson's flagship showcase network worldwide.

    Ericsson offers these services of network building and network operation to any carrier worldwide.
    anonymous
  • M2M WHAT THA??

    M2M Are into these countries and making money?

    They are 3.0 cents a share at the moment, they sound like the buy of the century eh?
    IMO

    I will research these guys big time, thanks for the story on Telstra David Braue!
    anonymous
  • Oh come on David

    You will attack them for investing or for not investing in overseas markets. You will never take one point of view and stick to it, you will flip flop on ideologies as long as it makes Telstra sound bad.
    anonymous
  • Telstra Telstra everywhere

    I was under the impression that Telstra had already moved into other countries on some level. I don't know if they are investing in infrastructure, but my quick research found these names, if anyone can be bothered, it might be worthwhile.

    Telstra Clear. (Telstra in NZ, http://www.telstraclear.co.nz/ )
    Telstra Asia (I found this ... http://telstra-asiasales.com )
    Telstra Europe (http://telstra.co.uk/ )

    Was David aware of this? or was it not mentioned becasue these arms of Telstra are wholesalers, and hence it's not relevent? (I can't say for sure whether they are wholesalers or not, that's just the impression I got from the websites).

    Enjoy
    anonymous
  • I also found this one

    http://telstra-usa.com/

    You can find them all via...

    http://telstraglobal.com/
    anonymous
  • Off Topic, But...

    I read this week that Buzz Broadband, Australia's first Wimax operator said it was a disaster.

    I am posting this here because I eagerly awaited a blog from David Braue or Jo Best with their thoughts on this, but it never came.

    David, Jo, can we expect some commentary on this? i would love to hear your thoughts.
    anonymous
  • Never happen

    It may make Telstra sound like they were right. They would ever do that.
    anonymous
  • NWAT Propaganda

    The Australian ISP Internode has been using FIXED Wimax successfully in South Australia (in areas which Telstra refused to upgrade for ADSL) for some time now. They plan to roll out more in the near future.

    The Wimax you refer to is most likely Wimax via unfixed mobile devices which was touted as a competitor to services such as NextG. The two are similar technology, but the OPEL and Internode variants are FIXED antenna solutions. They are not designed as an alternative to mobile data networks (as Telstra would have you believe).

    The Wimax which we will see a lot more of in the near future will be fixed, fast, and COST EFFECTIVE. It's certainly something the farmers around our area would be thrilled to use.

    Oh and Ernold, the link to that story on NWAT is currently broken, so you may wish to let your mate Sol know...
    anonymous
  • NWAT Propaganda? Not likely

    Hi Anonymous, thanks for your reply. Firstly, I'd like to note that I avoid NWAT like the plague. I read the article elsewhere. You can go to google and do a news search for wimax and many articles appear, and I didn't notice NWAT there at all.

    The fact of the matter is, Australia's first wimax operator called it a failure. Seeing as my tax dollars are funding a wimax network, I was interested to hear some commentary from someone who probably has more telco knowledge than myself.

    I'm sure that your point about Internode would have made the story too.

    And as for your comments about Sol. What a joke. I find that a bit insulting, all I wanted was as I said above, some commentary on the comments of the bloke from Buzz Broadband. Seems pretty serious to me, since Coonan decided to sink $1B into this network, but you appear so blinded by your hatred of Telstra that the only thing that matters is proving that Telstra was wrong and everyone else was out.
    anonymous
  • Commentary on Buzz Broadband

    Yes, I found that quite interesting -- but I found the response from Airspan even more interesting (I have only so far found it at http://www.commsday.com/node/228 if you're interested to have a read).

    I haven't blogged on it because it has already been widely covered and discussed. But basically, Airspan's assertion is that Buzz installed the wrong equipment, and too little of it, with inadequate backhaul to support what bandwidth was getting through. Given the success of WiMAX in other deployments I can only assume this is correct. Certainly it's a warning to Opel and other WiMAX operators to get things right -- but I haven't heard similar experiences from anywhere else so can only assume Buzz is to blame here. Perhaps Internode should set up in Hervey Bay to show how WiMAX can work when done correctly?
    anonymous
  • Mobile growth

    The figures I quoted have only recently come out of the Indian regulatory authority (www.trai.gov.in). I am of course aware of the rapid growth going on in India and many other markets, but seeing hard numbers put on that growth puts things into perspective, especially when compared with our relatively paltry size.

    My point in this piece is simply this: ventures like TelstraClear in NZ may seem like easy money to Telstra, but TelstraClear was actually losing money and is hardly an engine for major growth. The US mobile market is huge but already well serviced; Telstra is a me-too in that market. Ditto Europe, where a preponderance of competitors makes any real success quite challenging.

    Asia, on the other hand, offers significant growth opportunities for companies with the right value proposition. Telstra could offer that but I am failing to see any clear, aggressive strategy for Telstra to extend its business into the world's big growth markets -- eg India and China and, to a lesser extent, any number of other developing Asian companies.

    Telstra constantly talk about working for the shareholders' interests but in the end the Telstra of today would prefer to drop millions on pointless lawsuits against the government than it would in using that money to establish potential fast-growth investments. Instead, its Australian business is largely built around finding new ways to milk more and more money out of those very same shareholders, and out of the companies those shareholders work for. It's like one giant telecoms Ouroboros. In a market as small as Australia, this is hardly sustainable (and yes I am aware Telstra profits increased last quarter but consider where the increase came from). Telstra is a technically excellent company and I just think it could be doing a lot more with that excellence. It just has to be prepared to wear some real risk instead of falling back on its old ways all the time.
    anonymous
  • Investing

    I don't recall attacking them for investing. I'm just questioning why they're focusing on unproductive, insular business strategies when there are such significant opportunities out there that are ripe for the picking. I have no personal interest in making Telstra sound bad but unfortunately they leave themselves open to it on so many fronts. And, objectively, if I were an overseas investor with loads of money to invest in a high-growth mobile venture, please tell me why I would invest in Telstra when there are so many larger opportunities elsewhere.
    anonymous
  • 1.5 years to make it work though

    The purpose of "building" it in 10 months was to collect them big performance bonuses.
    Thereafter it took 1.5 years to tune it and make it reliable for the CDMA network it was meant to replace.

    Ericsson used a lot of "global" non-ericsson specialists to get the NextG network "built" which as we all know that when you fly in experts for a temporary role you get a temporary fix, and so on it went for another 1.5 years.
    anonymous