Telstra TPG Battle – Mobile users the only winners

Telstra TPG Battle – Mobile users the only winners

With TPG all set to launch in Australia by mid-2018, the telco wars are heating up. Telstra is gearing up for the challenge, and they have acknowledged that TPG is a threat that will capture some portion of their market share. This acknowledgement itself speaks volumes about the pressure that existing companies Telstra, Vodafone and Optus are feeling about TPG’s entry into the market as only the 4th independently owned network in Australia.

Telstra acknowledges the competition

Telstra chairman, John Mullen admitted that TPG is a formidable operator and they are not underestimating the impact on pricing and competition that TPG brings. Some key points from Telstra’s official shareholder address:

  • TPG will target customers in the lower price range. This includes customers in big cities and other price-sensitive markets where excessive competition reduces mobile charges.
  • TPG’s low price offerings will attract customers who prefer price over everything else (like coverage or customer service)
  • Telstra will lose customers who will happily switch for a large price discount. Especially in the initial days of launch when TPG is expected to come up with some very attractive offers.

Telstra, however, assured investors that the company has sufficient strategies and resources in place to deal with the highly challenging telco environment. It is prepared to deal with the increased competition, digital disruption and the migration to NBN over the next two to three years.

Telstra’s Key Strategies

Mullen dropped a few hints on how Telstra is planning to cope with TPG’s entry. They want to bifurcate the market so that they can continue operating in the premium end, where they already have a strong presence, while at the same time fighting for the 15-20% of the market share that is extremely price sensitive. They intend to continue marketing themselves as a superior product because of the investment that has been made over the years in their networks and their service plans.

Some of the areas that Telstra has been working on and believe they are superior include:

  • Greater plan flexibility and pricing options available for customers who choose to use Telstra for multiple service bundling.
  • Tens of billions of dollars invested so customers can stream Netflix and other videos rapidly.
  • Superior network coverage in regional Australia.
  • Additional perks like Data free music streaming, free wifi data by Telstra Air, free 200 GB cloud storage on One Drive and free two new movie rentals from Bigpond Movies.

Telstra pins hopes on Belong

Telstra has spent a lot of time planning and launching their low cost mobile offering Belong last month. Belong mobile is designed with the same cost structure and network coverage to what TPG offers. Key factors that differentiate Telstra Belong from Telstra Mobile include:

  • Unlimited data banking that lets you store unused data in your data bank so that you don’t lose what you don’t use.
  • No lock-in contracts
  • Set up, connect and fully manage your plan online
  • Additional 15GB data as a welcome gift on signing up.

By launching Belong early and aggressively marketing it as a low cost way to access Telstra’s superior network coverage, Telstra hopes to build a customer base that TPG cannot penetrate.

But is Telstra being overoptimistic?

Telstra’s reassurances to shareholders might just be on flimsy ground and not everyone is buying them. Share prices are dropping and investors are selling stocks in droves, especially after Telstra slashed dividends couple months back. As always, Telstra CEO Penn insists that things are under control. He claims that the slashing of dividends is not a reactive measure to the various challenges but a long-term strategy aimed at transforming Telstra from a telco to a techco – a technology company of the future.

Penn states that Telstra was forced to change with the times. Other technology giants like Amazon do not pay out dividends, because they reinvest the money towards growth. Increasing market share and reduced prices enhance product offerings, driving enormous share price appreciation. If Telstra had not handed out dividends over the years, they would be currently sitting on a war chest worth $50 billion. While this may be true, Telstra’s share prices in Australia have grown around an image of trust and dependability. Slashing dividends hurt Telstra’s reputation more than anticipated and share prices have only dropped since.

Is Telstra taking a similarly panglossian approach to the upcoming TPG threat? The Beyond mobile launch has not been overly successful and has signed up only around 150k customers in the first few months since launch. This number is insignificant when you consider that the mobile market is generally counted in millions. Customers are not rushing to sign up for the plan, probably because retail partners offer the same Telstra networks at a fraction of the price. Besides, there is no bundling or additional features people commonly associate with Telstra.

While Penn is going hoarse repeating the same messages again and again, the fact remains that Telstra needs to tread more carefully. TPG has invested billions of dollars in their own network and they intend to cash on it. A hastily launched, over priced data network might n

Thing to watch out for

  • High speed TPG networks with attractive launch deals at sign up. TPG invested over $1 billion to get its foot into the door and intends to lay-out over 4000 kms of fibreglass wire and achieve 80% mobile broadband infrastructure coverage before launch.
  • Possibly unlimited data plans at affordable rates. If TPG does this, other telcos, including Telstra, will have to follow soon enough. Else they wouldn’t survive the competition.
  • Over-all drop in mobile data prices and mobile network usage costs as Telcos compete with each other to maintain market share.

Sources:

http://www.news.com.au/finance/business/breaking-news/telstra-dividend-cut-tough-says-mullen/news-story/b57fec239e968f9c41469b2e77226883

With TPG all set to launch in Australia by mid-2018, the telco wars are heating up. Telstra is gearing up for the challenge, and they have acknowledged that TPG is a threat that will capture some portion of their market share. This acknowledgement itself speaks volumes about the pressure that existing companies Telstra, Vodafone and Optus are feeling about TPG’s entry into the market as only the 4th independently owned network in Australia.

Telstra acknowledges the competition

Telstra chairman, John Mullen admitted that TPG is a formidable operator and they are not underestimating the impact on pricing and competition that TPG brings. Some key points from Telstra’s official shareholder address:

  • TPG will target customers in the lower price range. This includes customers in big cities and other price-sensitive markets where excessive competition reduces mobile charges.
  • TPG’s low price offerings will attract customers who prefer price over everything else (like coverage or customer service)
  • Telstra will lose customers who will happily switch for a large price discount. Especially in the initial days of launch when TPG is expected to come up with some very attractive offers.

Telstra, however, assured investors that the company has sufficient strategies and resources in place to deal with the highly challenging telco environment. It is prepared to deal with the increased competition, digital disruption and the migration to NBN over the next two to three years.

Telstra’s Key Strategies

Mullen dropped a few hints on how Telstra is planning to cope with TPG’s entry. They want to bifurcate the market so that they can continue operating in the premium end, where they already have a strong presence, while at the same time fighting for the 15-20% of the market share that is extremely price sensitive. They intend to continue marketing themselves as a superior product because of the investment that has been made over the years in their networks and their service plans.

Some of the areas that Telstra has been working on and believe they are superior include:

  • Greater plan flexibility and pricing options available for customers who choose to use Telstra for multiple service bundling.
  • Tens of billions of dollars invested so customers can stream Netflix and other videos rapidly.
  • Superior network coverage in regional Australia.
  • Additional perks like Data free music streaming, free wifi data by Telstra Air, free 200 GB cloud storage on One Drive and free two new movie rentals from Bigpond Movies.

Telstra pins hopes on Belong

Telstra has spent a lot of time planning and launching their low cost mobile offering Belong last month. Belong mobile is designed with the same cost structure and network coverage to what TPG offers. Key factors that differentiate Telstra Belong from Telstra Mobile include:

  • Unlimited data banking that lets you store unused data in your data bank so that you don’t lose what you don’t use.
  • No lock-in contracts
  • Set up, connect and fully manage your plan online
  • Additional 15GB data as a welcome gift on signing up.

By launching Belong early and aggressively marketing it as a low cost way to access Telstra’s superior network coverage, Telstra hopes to build a customer base that TPG cannot penetrate.

But is Telstra being overoptimistic?

Telstra’s reassurances to shareholders might just be on flimsy ground and not everyone is buying them. Share prices are dropping and investors are selling stocks in droves, especially after Telstra slashed dividends couple months back. As always, Telstra CEO Penn insists that things are under control. He claims that the slashing of dividends is not a reactive measure to the various challenges but a long-term strategy aimed at transforming Telstra from a telco to a techco – a technology company of the future.

Penn states that Telstra was forced to change with the times. Other technology giants like Amazon do not pay out dividends, because they reinvest the money towards growth. Increasing market share and reduced prices enhance product offerings, driving enormous share price appreciation. If Telstra had not handed out dividends over the years, they would be currently sitting on a war chest worth $50 billion. While this may be true, Telstra’s share prices in Australia have grown around an image of trust and dependability. Slashing dividends hurt Telstra’s reputation more than anticipated and share prices have only dropped since.

Is Telstra taking a similarly panglossian approach to the upcoming TPG threat? The Beyond mobile launch has not been overly successful and has signed up only around 150k customers in the first few months since launch. This number is insignificant when you consider that the mobile market is generally counted in millions. Customers are not rushing to sign up for the plan, probably because retail partners offer the same Telstra networks at a fraction of the price. Besides, there is no bundling or additional features people commonly associate with Telstra.

While Penn is going hoarse repeating the same messages again and again, the fact remains that Telstra needs to tread more carefully. TPG has invested billions of dollars in their own network and they intend to cash on it. A hastily launched, over priced data network might n

Thing to watch out for

  • High speed TPG networks with attractive launch deals at sign up. TPG invested over $1 billion to get its foot into the door and intends to lay-out over 4000 kms of fibreglass wire and achieve 80% mobile broadband infrastructure coverage before launch.
  • Possibly unlimited data plans at affordable rates. If TPG does this, other telcos, including Telstra, will have to follow soon enough. Else they wouldn’t survive the competition.
  • Over-all drop in mobile data prices and mobile network usage costs as Telcos compete with each other to maintain market share.

Sources:

http://www.news.com.au/finance/business/breaking-news/telstra-dividend-cut-tough-says-mullen/news-story/b57fec239e968f9c41469b2e77226883

 

 

Neil Aitken

Having worked in 3 countries for 4 telcos on both voice and data products, Neil is in a position to give you the inside track. Get beyond the marketing messages to the best plan for you.