Telstra Analyst Event 2013: Many Rivers To Cross

Telstra hosted its annual analyst event in Sydney on October 23 and 24. In his keynote address, CEO David Thodey compared Telstra’s customer advocacy journey to a triathlon that the firm has just begun, which we believe it a fitting analogy for Telstra’s progress on the path it has set for itself. The company is clearly in the race and making progress, but still has many miles to go.

While the company shared a broad spectrum of initiatives, our main observations are that Telstra:

  • Has made clear progress since our check-in last year, but its transformation remains a work in progress. Telstra is no different than other incumbent telcos working to transform beyond traditional — and declining — sources of revenue. Its dominant position in Australia is secure, but its prospects in new market categories inside and outside of Australia are less certain. We do not believe that Telstra is particularly innovative compared with service providers in the US or Europe, but we do believe that it has a viable transformation strategy and is making progress. Its progress in the Australian media and entertainment industry, including its Foxtel investments, is impressive — it has built a large IP-based digital media file exchange platform to serve global broadcasters and content providers.
  • Has reaffirmed its strong customer focus but needs to use its Net Promoter Score (NPS) metrics to drive cultural change. One of Telstra’s three core strategic pillars is a push for world-class customer advocacy, and we were convinced by its progress and commitment in this area. However, we believe that the firm needs to use NPS first and foremost to drive cultural change. For example, it could look at improving the transactional process of device purchasing from a Telstra-branded retail store and how easily each purchase is completed. In addition, our research indicates that NPS is not enough, especially when it comes to explaining the how and why that are so critical to becoming a world-class customer experience brand.
  • Is tapping budding demand in network-based services. Key assets are its submarine cable network, IP network, and network-based communications services capabilities, which it is pushing as an international play. In this space, Telstra remain focused on network connectivity, including managed network services, and integrating the Australian and international networks into a single delivery platform. These will help Telstra (and Telstra Global) orchestrate network and communications services for its feeder market clients — those with home bases in Australia, the US, and Europe entering into Asia.
  • Is sending mixed signals surrounding its ICT ambitions. In a previous blog post, I argued that telcos are not natural ports of call for procurers of enterprise IT services other than connectivity services. Telstra’s successes, like with Australia’s Department of Defence, might mask the fact that the days of “easy wins” are over. We feel that Telstra is undergoing the same transition that CIOs have been going through over the past few years, which is aligning with lines of business and having to prove its value to its peers. As Telstra moves into broader categories of ICT and services, buyers become more diverse, more politically sensitive, and typically span many more roles inside enterprise organizations than the traditional “network manager.” Hence, Telstra’s opportunistic approach means that for enterprise customers, it will probably be exposed to some mixed experiences.
  • Has not fully fleshed out its enterprise mobility solution. Telstra’s enterprise mobility strategy is confined to addressing the M2M/BYOD challenge for the foreseeable future, and we did not get the impression that they had viable enterprise solutions as yet. In addition, little has been shared about Kony Solutions, a recent investment that would help it offer enterprise-focused mobile applications on a range of operating systems and devices. It was unclear about when, and how, working with SAP Mobile (a long-term Telstra partner) or Kony makes sense for the enterprise segment.

Telstra has begun to provide a clearer strategic vision, but questions remain in key areas, such as how it plans to integrate consulting and systems integration into its offerings. Telstra claims to be betting on a global rollout of network services and applications for enterprises, but we believe that there are solutions — like getting users “on-net” via mobility solutions in emerging markets — that cannot be easily or rapidly replicated outside Australia, given its challenger status. For enterprises looking at mobility solutions, work through Telstra partners to drive more outcome-based, rather than product-focused, solutions.