In general terms Telstra's full-year results are excellent. The focus is again on the mobile market, as that has been the major growth market for close to a decade. However, with market saturation and the utility-based nature of the services offered by the telcos, this market is becoming much tougher, in relation to both customer growth and revenue growth.
Nevertheless during the 2011-2012 financial year the company has been able to compete well in this market and has made some excellent gains. But these results need to be judged in the context of the severe network problems experienced by Vodafone, which saw large numbers of customers moving away from that carrier. Because of its aggressive marketing campaign offering very competitive prices Telstra has been the main beneficiary of Vodafone’s troubles.
Also, the overall increase of customers has come at a cost. Back in late 2009, the company put aside $1 billion for its ‘Project New’ to win back customers it had lost during the previous years because of its strategy of ‘premium pricing’. The result of these aggressive campaigns is also reflected in lower ARPU.
The company has now indicated that this campaign is over and that it is increasing mobile charges, obviously with the aim of increasing its profit margin.
It will be interesting to see how that pans out. Vodafone is turning around and has indicated it is here to stay, so it will have to do something very special to regain its position in the market; and Optus will remain aggressive in its competition with Telstra – with such levels of competition it is highly unlikely that it will be possible to increase profit margins in any significant way.
I am still very disappointed with Telstra’s digital media strategy and cannot understand why the company keeps the silo structures of Sensis, Foxtel and BigPond IPTV in place. This has been a disaster in the last decade and a continuation of that strategy will only aggravate the disasters.
The company is talking down developments such as IPTV and other OTT business models, and this is a very dangerous attitude to take. While those new business models might not necessarily replace the lucrative revenue streams such as those delivered by the old media, what they do is undermine the old models. We have seen this happening in other sectors such as music, publishing, retail and broadcasting.
With its current strategy there is no way that Telstra can increase its position in the digital media market. This siloed approach will only see others (such as Google, Facebook, YouTube, Apple, etc) becoming more successful in Australia.
Telstra will have to start looking at where the next revenues streams are to come from and those strategies are still unclear. This is also reflected in the somewhat negative view of the financial analysts.
Paul Budde is the managing director of BuddeComm, an independent telecommunications research and consultancy company, which includes 45 national and international researchers in 15 countries.