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Optus ‘lost its way’ says CEO Featured

Optus Consumer CEO Kevin Russell has given an extended interview to the ABC. He did not hold back. Optus will compete against Telstra on service, but continue to wind back retail.

Optus has been "running the wrong race” in Australia, said Russell. "I think we've lost our way in the past three or four years," he told Alan Kohler's Inside Business program., in a wide-ranging and refreshingly frank interview.

"I think we could have done better in the last three or four years and I believe overall, we followed the market a little bit more than led the market. I'm not saying that Paul did a bad job at all," he said, referring to his predecessor Paul O'Sullivan, who he replaced in March 2012. “A lot of the directions that we are changing are absolutely directions that Paul has driven.

“But I am saying that the industry in Australia in my view has gone backwards over the last five or six years in terms of how it treats its customers. I think that's a collective issue, I think it's across all of the major carriers.

"I'm coming in with a fresh set of eyes. I've got a view based off five years in the UK and argue about a different environment and I believe the European operators have moved ahead of the Australian operators in terms of how they think about brand, how they think about customers. I'm able to bring that into the Optus role.

"If I look at Optus today and how it moves forward, it's been running the wrong race. "I'm very clear about where the Optus brand needs to go. It needs to differentiate in terms of doing the right thing by Australian consumers. We’re not going to beat Telstra by outspending Telstra. We’re not going to beat Telstra in infrastructure. We can beat Telstra because we care about our customers more, day-in day-out.

"The big but is what happens in the competitive landscape if there is a change in government. What does it mean in terms of where Telstra lies? If it's another step where potentially the landscape gets tilted in Telstra's favour, it's a concern, and that's not clear just now.

"It's quite hard to run a business when there isn't concrete certainty. You may not like decisions but at least if they are made and it's certain you can go forward," Russell said. "Telstra negotiated a very nice pot of gold on a business that was probably declining, or was declining, and they are in a stronger position than they have ever been.

"Just now we are still in this bit of, not limbo, but a position where things have been clarified and things are moving. It would be nice to fast forward 12 months and have a clear view in terms of how the business evolves."

He also spoke about changing current fees structures, which he says are unsustainable. "It’s about changing the way you make your money. The way we make our money in terms of breakage revenues and incremental fees has to change because it's not sustainable. You can't rely on 15-year-old children going over caps and having $2,000 or $3,000 data bills. That's just wrong. It's wrong morally and it's not sustainable.

"So that has to change but that doesn't necessarily mean your profitability goes backwards. My point from day one has been the way we spend our money, the cost structure we have in the Australian market place can be fundamentally improved. I believe our revenue next year will also go backwards by single digits but our profitability will improve.

"That's just with managing your core structure smarter, because I think this chase for customers has meant a lot of money has been thrown into subsidies and channels very inefficiently. I believe there's an opportunity to rebalance, but it takes brave decisions."

Russell also said Optus will also reduce its retail footprint by 45%, a process that has already began with its reduction in its reliance on retail channel partners. "There are significant savings there which we will invest into network and our service capability.

We are reducing our marketing budget this year. Trying to shout loudly and spend your marketing dollars when your core service needs to get better doesn't make sense. So it isn't just a case of spending, it's a case of balancing how you invest your money in my view in a smarter way, in a customer-centric way."

Russell, originally from Scotland, has been in the job barely 12 months, but he knows Australia well. He joined the company after five years as Deputy CEO and CEO of Hutchison 3 in the UK, but before that he was CEO of Hutchison Telecom, known as 3, in Australia, where he rolled out Australia’s first 3G network.

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Graeme Philipson

Graeme Philipson is senior associate editor at iTWire and editor of sister publication CommsWire. He is also founder and Research Director of Connection Research, a market research and analysis firm specialising in the convergence of sustainable, digital and environmental technologies. He has been in the high tech industry for more than 30 years, most of that time as a market researcher, analyst and journalist. He was founding editor of MIS magazine, and is a former editor of Computerworld Australia. He was a research director for Gartner Asia Pacific and research manager for the Yankee Group Australia. He was a long time IT columnist in The Age and The Sydney Morning Herald, and is a recipient of the Kester Award for lifetime achievement in IT journalism.

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