Optus' new charm offensive

Optus CEO Kevin Russell isn’t mincing his words when it comes to how poorly Australian consumers have been served so far by their telcos. And after a candid performance on stage at the Australia Israel Chamber of Commerce (AICC) lunch last week, a suitably contrite Russell told ABC’s Inside Business on the weekend that it was time telcos stopped lining their pockets by punishing their customers.

Nothing wrong with that sentiment and in fact, Optus is doing its bit with its customers paying no more than $200 for exceeding their domestic caps and $500 for going over global roaming limits.

That generosity may hurt revenues - the telco reported a 4.6 per cent fall in revenue for the year to March 2013 - but presumably builds goodwill and brand loyalty. Russell spent a lot of time last week spruiking the net promoter score (NPS), a customer metric that currently sees local telcos firmly rooted to the bottom.

Five years ago the average NPS for the Australian telcos was -31, today it stands at -41.Optus’ net promoter score current sits at around -24 per cent and Russell wants to rectify that situation by giving his existing customers unmatched service and pricing flexibility.

The launch of a new range of mobile broadband plans this morning is ample evidence of Russell’s resolve but we will have to wait and see if customers are willing to put their cynicism to one side.

Ending its fixation with new customers isn’t exactly a new strategy from Optus, which has progressively focused on retaining its existing customer base. This passivity has forced some critics to say that Optus is happy playing second fiddle to Telstra but will the telco’s new-found aggression and its customer-centric message pay dividends in the long run?

Potentially, but Optus' staff are still strait-jacketed by its existing operation systems, says Full Circle Group analyst Tony Simmons.

“There is no point saying that you are a customer-focused organisation when your staff are still limited by the systems that back them up,” Simmons said.

“Operationally they are nowhere and they have to start by fixing that.”

Simmons adds that Optus has for a long time suffered from a corporate identity crisis, which hasn't done it any favours.

 “Who cares about bill shock if everything moves to IP anyway.”

It’s a pertinent point, because consumers already have the capability to make bill shock irrelevant by managing it through the software layer on their smartphone. It highlights how important execution will be for Optus, because there is no point spending an inordinate amount of time fixing problems that have already been solved by nimbler internet outfits.

The most sanguine element of Russell’s concerns is that Optus just can’t compete with Telstra can when it comes to infrastructure and spending. Telstra might have its hands full temporarily with the asbestos drama, but the NBN payments will further entrench its place as the king of the mountain. Faced with that reality, Russell’s plan involves locking in the customers it has through stellar service and pick up some of the churn from Vodafone Hutchinson Australia.

That’s one segment that just hasn’t worked for Optus so far with a lot of former Vodafone customers choosing to go with Telstra rather than Optus. Hopefully, Optus’ promise of eradicating bill shock will put an end to that trend.

Optus’ strategy of sacrificing short-term revenue growth to focus on customer service makes sense given the maturing state of the market, and we might have seen the first instalment of what that approach entails with the release of today’s new mobile broadband plans. However, just how long Optus will be given to see its new strategy come to fruition is still an unknown.

Ovum analyst David Kennedy says that winning over cynical customers won’t be easy but Russell’s candid assessment helps. By the same token Singtel will have a broad timeline in mind with regards to the strategy after which it will demand results.  

Kennedy says that Russell’s best bet is to “under promise and over deliver.”

Optus has made it quite clear that it’s trying to carve out a niche for itself in a maturing market. When it comes to customers Kennedy says that Russell’s best bet is to “under promise and over deliver.” If he can do that and is able to lure customers away from Telstra and Vodafone, then profits could follow.

However, that’s going to take some time and Russell might have to follow the “under promise and over deliver” strategy with SingTel as well.