Posted by Clement Teo on August 21, 2013
Telstra’s recent FY13 earnings announcement recorded a strong showing of its Network Application and Services (NAS) division, which saw a 17.7 per cent increase in revenue to A$1.5 billion from the previous year. Its international business delivered a combined Global Connectivity and NAS revenue of A$566 million, or a growth of 11.4 per cent from the previous year. Telstra also plans to continue to build out its NAS division, particularly in Asia.
What It Means
A beneficiary of the NAS investment is Telstra Global, nestled under its International division, offering network connectivity and services to enterprises in Asia. In my recent report, I argued that Telstra Global is a well-placed partner for medium-size to large companies in sectors like transportation and logistics, shipping, manufacturing, and professional services looking to expand their operations out from Hong Kong, Australia, and Singapore into Southeast Asia and China. While this looks rosy, there are areas that require closer attention:
- Transforming from a telephony to an enterprise computing player.Telcos are not natural ports of call for enterprise IT services procurers, save for connectivity services. Telstra successes in Australia, e.g. with Department of Defence, might mask the fact that the days of ‘easy wins’ are over. Given the intense IT services market, the likes of IBM, Dimension Data and even Fujitsu will prove to be tough competitors not just in Australia but elsewhere in Asia, and Telstra Global will have its work cut out in making the leap from telephony provider to enterprise IT player.
- Software development is not a telco competency. Telstra Global’s NAS strategy relies on software leadership; much as they might like to believe, its forte is not in software development. As my colleague John Brand has remarked, becoming a software player is hugely difficult, and expensive, if that’s not a core competency. The way that technology has changed over the last 10 to 15 years, it’s becoming harder to become a specialist in all of those different areas of software. In addition, there are challenges ahead that may be too big to overcome, e.g. with partnering other software vendors and managing third-party relationships.
- Focusing on some Asian hubs limits its regional influence. Telstra Global’s bases in Hong Kong, Australia, and Singapore serve some connectivity routes well, but limit its influence on others. For example, it does not operate data centers in China and needs a local carrier for last mile connectivity. This affects provisioning times, quality of service issues, and even pricing of routes. Even in some Southeast Asian countries, local providers have the upper hand in pricing discussions, and Telstra Global needs to work on improving bilateral relationships to smooth out these disadvantages.
In the right solution segments, Telstra Global is an attractive option for organizations looking for an alternative to their global network service provider in key regional hubs. Enterprises will need to engage Telstra Global to understand how, and where, it could serve them.
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