Verizon's Asia-Pacific push will set it against Telstra

AMERICA'S largest telco, Verizon, is making a stronger push for small and mid-sized business customers in Asia, competing head-to-head with Australian providers such as Telstra.

By InvestSMART · 8 Nov 2012

By InvestSMART ·
8 Nov 2012

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AMERICA'S largest telco, Verizon, is making a stronger push for small and mid-sized business customers in Asia, competing head-to-head with Australian providers such as Telstra.

Verizon has "significant plans" for its secure internet and cloud computing products around the region following a company restructure earlier this year.

While it is not targeting Australia specifically, the company wants more business through the region as part of a global marketing drive.

Even so, the growth of Australia's services sector made local companies a target, Verizon chief marketing officer John Harrobin said.

"We believe that we are positioned to be one of the handful of players worldwide that can serve the mission critical needs of enterprise customers," he said at the telco's annual Asia-Pacific media forum.

The move into the region puts Verizon in direct competition with Telstra, which wants its international arm to sell more global data and telecommunications services to companies with offices in Asia.

Telstra owns an undersea cable network in the Asia-Pacific region and Hong Kong mobile company CSL New World Mobility Group.

Telstra chief executive David Thodey recently cited expansion into Asia and more multinational corporate clients as a key strategic priority for Telstra in 2013.

But he admitted Telstra was not going after the largest companies because it was still too small.

Mr Harrobin noted that Telstra still lacked infrastructure in key growth areas in Asia.

"Telstra has done a remarkable job with respect to building a company within Australia and [has] very laudable plans to deploy globally as well," he said.

"But when you look at where the opportunities are and the assets that are required to serve them . . . if I were to compare their asset base with other asset bases, I would probably conclude it would be harder for them to expand globally without certain partnerships."

Verizon already provides telecommunications for some Australian government departments and to companies in the financial services, as well as mining and manufacturing industries.

It was not only targeting global companies, but would happily provide cloud-computing services for medium-size companies that only have Australian operations, Mr Harrobin said.

IT services are moving from a premises-based service to a cloud-based service and this would be a "massive disruption" in the sector, he said.

"It is in this discontinuity for Verizon to reposition itself in the market place and capture additional value."

Verizon merged its global wholesale, enterprise and government, and global wireless divisions earlier this year to create Verizon Enterprise Solutions. This arm contributes about a quarter of Verizon's annual revenue, which reached $US110 billion in 2011.

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Frequently Asked Questions about this Article…

What is Verizon's Asia-Pacific expansion plan and which customers is it targeting?

Verizon is making a stronger push into the Asia-Pacific region focused on small and mid-sized business customers as well as enterprise clients. After a corporate restructure, it plans to grow sales of secure internet and cloud-computing products across the region as part of a global marketing drive.

How does Verizon's push into Asia-Pacific put it in competition with Telstra?

Verizon's move brings it into direct competition with Australia’s Telstra for regional corporate and multinational customers. Verizon says it can serve mission-critical enterprise needs, while Telstra is expanding internationally — but Verizon’s executives note Telstra currently lacks some infrastructure in key Asian growth areas.

Is Verizon specifically targeting Australian businesses with its cloud services?

The article says Verizon is not targeting Australia specifically, but the growth of Australia’s services sector makes local companies a natural target. Verizon already provides telecoms to some Australian government departments and companies in financial services, mining and manufacturing, and it would happily offer cloud services to medium-sized firms operating only in Australia.

What products and services is Verizon emphasizing in the Asia-Pacific region?

Verizon is emphasising secure internet solutions and cloud-computing services as businesses shift from on-premises to cloud-based IT. The company sees this shift as a major disruption and an opportunity to capture additional value in the market.

What is Verizon Enterprise Solutions and how significant is it to Verizon’s revenue?

Earlier in the year Verizon merged its global wholesale, enterprise and government, and global wireless divisions to create Verizon Enterprise Solutions. That arm contributes about a quarter of Verizon’s annual revenue — Verizon reported roughly US$110 billion in revenue in 2011.

What assets and moves has Telstra made in Asia-Pacific that matter to investors?

Telstra owns an undersea cable network in the Asia-Pacific region and Hong Kong mobile company CSL New World Mobility Group. Telstra’s CEO has prioritised expansion into Asia and winning more multinational corporate clients, though he has acknowledged limits when competing for the very largest global companies.

Why does Verizon believe it has an advantage over Telstra in expanding across Asia?

Verizon’s chief marketing officer noted Verizon’s global asset base and recent restructure position it to serve mission-critical enterprise needs worldwide. He suggested that Telstra may find it harder to expand globally without certain partnerships because it lacks infrastructure in some key Asian growth areas.

What should everyday investors watch as Verizon expands in Asia-Pacific?

Based on the article, investors might monitor growth in Verizon’s enterprise and cloud revenues, signs of increased competition between Verizon and Telstra for corporate clients, Telstra’s progress on international infrastructure and partnerships, and broader cloud adoption by regional businesses — all of which could affect market share in Asia-Pacific telecom and IT services.