Revenge of the Sol: Telstra empire strikes back

Alex Zaharov-Reutt
Friday, 22 February 2008 06:22

Opinion and Analysis

Ovum’s David Kennedy said that there seem to be “two key reasons for Telstra's remarkable performance”.

First, Kennedy says Telstra has “achieved dominance of the broadband content market with its Bigpond portal”.

Here Kennedy is clearly talking about all of the additional products and services Telstra offers through BigPond, many of which (but not all, such as BigPond TV) cost extra money to access, but don’t count towards a user’s download limit. This stops users being charged twice, and gives BigPond subscribers access to a range of legal download services for movies, music, TV shows and more that, in totality, aren’t being provided by any other local ISP.

Kennedy then goes on to note the success of the Next G network, saying that it has also “achieved has superior network coverage and data performance with its 850MHz 3G network. This has differentiated Telstra from its competitors in the core markets”.

Building the Next G network was a stroke of genius, for it placed Telstra at least two years ahead of the competition, who will still have a slower and smaller coverage network once they ‘catch up’, if that is even the correct term to use when catching up still leaves you in an inferior position.

Kennedy then notes what he believes is the second key reason, which is says is Telstra’s “integrated marketing strategy”.

He says that: “Telstra's presence across so many markets allows it to build up a detailed picture of customer usage. Over the last eighteen months, Telstra has been implementing a sophisticated needs-based customer segmentation based on this capability, allowing it to drive cross- and up-selling of services through bundling and targeted marketing”.

What this has resulted in is “Rising market share, ARPU growth and low fixed churn in key product lines suggests that this strategy is delivering real benefits”.

And all this in the face of much resistance from the band of rebels that are Telstra’s competition. Yes, ‘the rebellion’ have scored some hits – many of the competing wireless broadband, mobile phone capped and ADSL Internet plans are vastly more affordable than Telstra’s offerings.

Yet Emperor Sol has kept a firm grip on the Telstra empire, still delivering strong results despite all the competition.

Clearly, whatever the competition has been doing has not been enough. They must redouble their efforts and their marketing or face being wiped out or relegated to bit player status. There is no solace in that, and would be very bad for the competitive nature of the telecommunications industry in Australia.