COMMENT: The latest Telstra results reveal a lot of upside despite a 36% decline in profits.Telstra management know that the technology landscape is changing, content including music, movies, applications and cloud services, are very much the future and this is where Telstra is going.
They also know that as the NBN is rolled out and ISPs are operating on a common technology platform, that customer ownership and retention is critical to the growth of their business, and so are new products and marketing.
Pain now in the form of a 36% decline in profits is well worth taking when one is able to add 1.05 million customers who have purchased 70,000 iPads, since being launched, 400,000 iPhones and 400,000 new Android phones. They have also added 505,000 new mobile broadband customers and now have over 2.2 million mobile broadband devices in the market.
The cost of getting these customers and supplying them with the devices they need is worn by Telstra upfront which is why after acquiring a million new customers their profits are looking, as one Channel 10 journalist said, “Horrendous”.
During their recent trading period Telstra has also added 120,000 new Telstra T Box customers who are now spending, on average, $4 a week on movies, and as content becomes a key driving force, Telstra who is already delivering over 2,000 movies to their T Box customers and are close to getting first run movies six to eight weeks after they come out of a cinema run, is in a prime position to be a major content player in Australia, much to the angst of people like the Seven Network who recently dumped their TiVo offering due to poor sales and little content.
The new world order is IP enabled devices such as TVs, Smartphones, netbooks and notebooks as well as a new generation of tablets that suck up data and content downloads.
For Telstra, who are set to start selling IP enabled TVs along with the content and data that is delivered to them, the future is looking extremely bright, to the point that they could well start hurting a lot of mass retailers who are not their partner, as they directly sell hundreds of thousands of devices to consumers and business that are IP enabled.
In the SMB market, Telstra is growing by offering small business a host of new capabilities, from transaction technology, to VOIP services to cloud services to a host of new devices.
Their NextG Wireless is also growing with Telstra already set up to transition to 4G and LTE Wireless technology, which is capable of delivering movies to tablets and other devices in a matter of seconds.
With their NextG wireless network Telstra can operate outside of the NBN in the delivery of future Wireless capability. In the USA 24% of households are already Wireless only. In Australia this is 12% with Telstra tipping that it could reach 24% very quickly.
Another big benefit for Telstra is the billions that were spent on their backend billing system two years ago, this system can now easily transact click revenue for content and application downloads as well as movies delivered to TVs.
By this time next year demand for cloud based service will have grown by over 30% according to several research groups with Telstra able to offering cloud storage as well as access to applications that sit in a cloud environment such as accounting and CRM applications to services for the home such as DropBox.
Turning Telstra around from being a cumbersome beast to a nimble player, was never going to be easy. It’s akin to trying to turn the Titanic around in rough seas without copping any turbulence.
What CEO David Thodey is doing is repositioning Telstra for an NBN era. He has got rid of over 300 senior managers and his “New” project which is currently working on 27 projects designed to deliver revenue in the future are well advanced.
I suspect that we could see a big brand relaunch of Telstra as new management start to reposition the company from the Telstra of yesterday to the Telstra of tomorrow.
This could well involve a totally new positioning for Telstra as they battle to take a leadership position using the NBN and their wireless network to deliver new IP based services.