Optus' SingTel embrace

SingTel's radical restructure should make Optus a far more competitive beast when it comes to innovation and taking on the threat posed by the likes of Google and Apple.

Optus’ parent SingTel Communications’ decision to restructure its business has been broadly welcomed by analysts with many saying that it’s a move that was perhaps long overdue. That’s a fair point because its time the regional giant flexed its substantial financial muscle to launch an offensive against the likes of Google, Apple and other OTT (Over-the-top) service providers that are chipping away at the revenue base of mobile operators.

Breaking up the firm into three separate units, with a clear demarcation between consumer and enterprise space, certainly positions SingTel and Optus to become a more competitive outfit as the sector evolves. After being berated in some circles for dropping the ball Optus is certainly showing signs of renewed vigour, the acquisition of Vividwireless last month was a significant signal of intent and the SingTel restructure can now potentially deliver plenty of benefits.   

The biggest implication for Optus is that its chief executive Paul O’Sullivan will now move further up the SingTel food chain. SingTel’s Group Consumer division will now be under the direction of O’Sullivan, who will be responsible for SingTel’s 400 million strong mobile customer base.

There was plenty of talk at the start of this year that the appointment of former Hutchison executive Kevin Russell as Optus chief operating officer in January was a precursor to a potential restructure.

While that speculation has to some extent proven to be true, it’s not quite as dramatic as first imagined. Russell will be running the day to day show at Australia’s second-largest carrier from April but the real power will still remain in the hands of O’Sullivan.

The obvious benefit for Optus is that it will now be able to better leverage the global scale of SingTel.

It also brings the benefits of a lower cost structure and stronger product capabilities, especially as the digital services unit – under the auspices of Allen Lew – starts to ramp up SingTel’s OTT and mobile advertising initiatives.

Another plus highlighted by O’Sullivan is that Optus will be better placed when it comes to securing better purchasing deals with equipment and device vendors. The new ICT division formed out of the restructure should also prove to be fertile ground for Optus and should give Optus Business greater access to big regional enterprise customers.   

According to Telsyte analyst Chris Coughlan, the reshuffle is a win-win for both SingTel and Optus as Singapore and Australia transition to a fibre access environment.

“The new structure will better enable SingTel to bring innovative applications and services to market in all geographies,” Coughlan says.   

One interesting point made by O’Sullivan yesterday was that maintaining a strong country focus was a key priority for him. That again bodes well for Optus because the biggest challenge for SingTel will be to successfully integrate its regional strategy with its existing country strategies.  

According to Ovum analyst Nicole McCormick, SingTel’s attempt to “disrupt adjacent’ verticals like media and financial services is a bold step managing the transition to a regional mould will be a challenge.

“Pan-group management across such a large and diverse portfolio will not be an easy task, and execution will be challenging,” McCormick says.

“Country differences will need to be taken into account and SingTel must successfully integrate its regional strategy with its country strategies.”

It’s a sentiment shared by telco analyst Paul Budde who says that he is surprised by SingTel’s move to abandon their geographic borders and operate at a cross regional level.

“It certainly does add strength but on a customer/marketing level the telecoms markets do tend to remain national and on that level there might not be that much synergy by operating cross-regional,” he says.

According to Budde, the best thing about the restructure is the fact that SingTel and Optus have woken up to the fact that they were being left behind on a number of fronts.

“So far the telecoms industry has lost many digital economy/media opportunities to the likes of Google, Apple;   they have been slow to adjust and they are not well positioned as engineering companies to take on the new (marketing/app players),” Budde adds.  

So there’s plenty to cheer about as far as Optus’ long-term prospects are concerned, but it should be business as usual for Optus customers.  Just how much they will benefit from the tighter integration of Optus into SingTel will come down to how successful its parent is in turning bold intentions to concrete results. 

Telcos have so far been left chasing the game and their track record is poor. However, there is plenty of potential for the transformation at SingTel to lead to significant benefits for Optus customers and the looming presence of O’Sullivan should ensure that is the case.