Telstra should consider rebranding its various departments including BigPond in order to claw back market share and ready itself to fight against smaller, fast-growing competitors, one telco analyst warns.
The comments come as Telstra continues to suffer record low share prices as the company embarks on an ambitious multi-million dollar plan, called “Project New”, in order to reduce customer complaints, increase market share and one-up competitors with new products and media content.
Yesterday chief executive David Thodey outlined 27 separate goals for the telco giant including reducing complaints by 30%, gaining market share in wireless broadband and an aim to produce 20% of revenue through media, international and network services.
It comes as the company is suffering a record low share price, which has fallen over 22% during the last year with 18% of that lost within the past three months. This morning shares were trading at $2.65.
But Telsyte research director Foad Fadaghi says the company is still in a bind. Although he says those initial goals are a good start, he argues the company should also consider rebranding its various departments in order to improve its reputation.
“They need to compete harder in the markets they play in. They could also look at rebranding and reinvigorating their brand. At the moment Telstra does not have a positive image, and whether they look at creating sub-brands, like Qantas did with Jetstar, that could be a short-term solution to generate profit.”
New reports from Fairfax this morning indicate the company will shed up to 6,000 jobs over the next few years as part of this restructuring plan. “This company must change,” Thodey said yesterday, “and it must undergo significant restructuring.”
Part of the problem is the continuing negotiations regarding the National Broadband Network. While Telstra says it is not “transfixed” by the project and will continue business as usual if the deal doesn’t go ahead, Fadaghi says there are bigger problems at hand.
Thodey told investors at a briefing yesterday that while it hopes to complete an agreement with the Government by November 19, it won’t be disrupted if a deal isn’t made.
”I am trying to get us away from being dependent on any [political] outcome… They want to spend $43 billion, I get $11 billion, I can take it to shareholders, great, let’s get on with life. If not, then let’s go and do something else.”
But Fadaghi says while Thodey can continue to brush off the NBN, the company will still suffer if problems aren’t addressed. He says smaller players like iiNet and TPG are rapidly gaining market share ahead of the NBN and Telstra needs to do the same.
“They do have a strong mobile network and engineering routes. I think David Thodey is correct in saying the business needs to be sales and marketing focused – but that story has been read before. IT’s difficult to transform the company into something it fundamentally is not.”
“The company has made good strides into internet TV with their T-Box offering, which has sold several thousand. The fact they are bundling products is a good thing.”
However, Fadaghi points out the company is still putting an emphasis on fixed telephone lines when demand for those services are falling. He says the company’s bundled products still focus on the home telephone line, when in reality that service is becoming used less and less.
He also points out that many of the company’s upcoming problems are simply out of its control.
“One that I spoke about today was the question about how they are going to respond to multi-national online companies doing over-the-top services? How are they going to respond to Google and Apple, and the products and service that will move over the top players?”
Fadaghi says eventually these companies are going to be making more than the firms actually providing internet services, and “that is going to cause some attention and lead to significant challenges and clashes”.
“If you look at how telcos are dealing with Google in the US right now, part of the solution could be around partnerships. I think Telstra learned its lesson when they took Google head on with Sensis and tried to do something there. They need to consider what’s going to happen around that in the future.”
The “Project New” plan is an attempt to drastically simplify the business ahead of these problems. Thodey says the company is too big to address the issues plaguing its growth and will need to undergo a drastic restructure.
Thodey said yesterday the company simply has too many suppliers and that customers are being transferred from department to department too often. The Project New scheme is an attempt to cut down the size of the business and make the company more customer-centric.
Telstra also said yesterday the plan will allow the company to continue paying shareholders an annual dividend of 28 cents per share. “The purpose of our strategy in 2010/11 is to improve the company’s long-term EBITDA and cash flow, which will underpin our ability to fund dividends in the future,” Thodey said in a statement.
Part of the plan includes a 6% improvement in customer satisfaction scores, a 10% increase in retail productivity and a goal to have 35% of customer transactions conducted online by the end of 2013.
Fairfax reports the company told investors that redundancy costs would reach $220 million during 2010-11, but no further confirmation would be given as to how many jobs will be cut. Telstra was contacted for comment but no reply was received before publication.
“We are just trying to take out the exorbitant overhead that’s been built into some of our processes,” Thodey told the Australian Financial Review today.
Fadaghi says it is encouraging the company is already aware of its problems, but says more needs to be done.
“They are aware. The over-arching message at this conference is that they are aware of the problems, they are willing to discuss them and they will find ways to solve them. It’s encouraging, but there are big problems that need to be addressed.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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