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Telstra leverages China, Indonesia for NAS growth across APAC

Amid a disinclination to provide global services for large corporations, Telstra said it is instead leveraging its Asia-Pacific acquisitions and joint ventures to provide network services there.
Written by Corinne Reichert, Contributor

Telstra is leveraging its joint ventures in China and Indonesia for growth of its network applications and services (NAS) business, after admitting a "reluctance" to enter foreign markets to serve domestic enterprises or multinationals on a global scale.

Martijn Blanken, group managing director for Telstra Global Enterprise and Services, and the executive responsible for Telstra's presence in China, said that for the most part, Telstra is "very deliberately and very consciously" focused not on running global operations for multinational corporations and international carriers, but rather simply those companies' Asian and Australian operations.

"We're quite reluctant to go into particular countries and start serving what we call domestic enterprises," Blanken said at the Telstra Vantage 2016 conference in Melbourne on Wednesday.

"The two exceptions to that rule is ... in Indonesia, the joint venture with Telkomtelstra, which continues to be a strategic growth area for us; and in China, we also have a joint venture, we call it PBS: Pacific Business Services [Pacnet], where we both service multinationals that are coming into China and out of China, but also India and other Chinese-specific enterprise and government customers."

The carrier is therefore utilising both Pacnet and Telkomtelstra for building up its international NAS business.

According to Blanken, there are five categories under the banner of NAS: Managed network services, unified collaboration, cloud services, integrated services management, and a range of "industry-specific solutions".

During the first half of FY16, income from Telstra's NAS business increased by 32.7 percent to AU$1.34 billion, with international NAS revenue doubling to AU$86 million.

Of its NAS income, managed network services contributed AU$303 million, an increase of 28.9 percent, for the half year; unified communications contributed AU$402 million, up 15.5 percent; cloud services contributed AU$181 million, up 50.8 percent; industry solutions contributed AU$362 million, growing 44.2 percent; and integrated services contributed AU$88 million, up 66 percent.

The half-year results marked the first six-month reporting period taking into account revenues from its $697 million Pacnet acquisition. According to Telstra, Pacnet added AU$247 million to income growth, with AU$35 million added to NAS revenue.

"We are tracking ahead of our targeted integration synergies, and have successfully combined the teams of the two companies across branding, products, pricing, and customer relationships," Penn said in February.

"Our Telkomtelstra joint venture in Indonesia is fully operational and serving its first customers, as well as showcasing business offerings through Indonesia's first Customer Experience Centre."

David Burns, acting group executive for Telstra Global Enterprise and Services, and one of the executives responsible for Telstra's Indonesian presence, on Wednesday called Pacnet "an incredibly important part of our Asia-Pacific piece".

Despite this, Telstra late last year sold off its Singapore and Thailand Pacnet ISP assets and business for $4.4 million to Singaporean cloud and datacentre provider DeClout.

However, Blanken revealed that keeping those particular assets "was never our strategic intent", with Telstra always intending to onsell them because it did not think it was "the right owner to drive its scale".

The Telkomtelstra joint venture, meanwhile, is allowing Telstra to provide three primary services in Indonesia, according to Burns: Predominantly managed network services; the recently announced cloud-based services; and an upcoming announcement at the beginning of calendar 2017 to launch a collaboration service for the Indonesian market as well, which Telstra flagged on Wednesday.

"We're very positive and very excited about the Indonesian market," Burns said.

"We recognise that is a long-term investment, a long-term commitment to the Indonesian market, and that's what we're making. Telkom Indonesia to us was the only partner to go with, so we're very delighted to be working with Telkom, and in particular what Telkomtelstra ... what the objective of that joint venture is, [is] to build a services-based business, so a network-connectivity services business on top of the network connectivity itself.

"Telkom did not see that as a strength of their organisation, but it is a strength of Telstra, so the two of those combined work very well."

At the start of 2014, Telstra and Telkom Indonesia announced signing an MOU for a joint venture for NAS, allowing Telstra to enter the Southeast Asia market and take advantage of Telkom's customer base.

Telkomtelstra signed its 50th customer last week, according to Burns, who added that "there is no one in Indonesia" that could provide an end-to-end service-level agreement (SLA) for network availability aside from Telstra's joint venture.

Last month, Telstra's venture capital arm Telstra Ventures also signed an MOU with Telkom Indonesia's corporate venture arm PT Metra Digital Investama for the purposes of collaborating on startup investment opportunities in the region.

The MOU will provide Telkom Indonesia with the ability to leverage Telstra's expertise and relationships with global startup hubs in Silicon Valley, Israel, and China, Telkom Indonesia group chief strategy officer Pak Indra Utoyo said. In return, Telkom will provide Telstra with experience in the Indonesian startup market.

"Over the last two years, Telkom and Telstra have established a good relationship, bringing network applications and services to businesses in Indonesia through our joint venture, Telkomtelstra," Pak Indra Utoyo said at the time.

"Our continued partnership extends to collaborating on venture opportunities in the region, where we will again leverage both Telkom and Telstra's deep local expertise as well as experience in global ventures investments."

Disclosure: Corinne Reichert travelled to Telstra Vantage in Melbourne as a guest of Telstra.

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