Tit for tat Telstra: CEO rails against energy companies offering phone and Internet services, says it will sell electricity to phone subscribers

• T22 strategy not yet completed. T25 starts in July next year
• “A strategy of necessity become a strategy for growth”
• “An exceptional customer experience” promised. Not before time

Australian telco Telstra has an historical reputation, going back donkey’s years, for providing abysmal customer service, so it’s as amusing as it is seemingly bizarre that the CEO, Andy Penn, has been having a pop at energy companies that have added to their offerings by providing phone and Internet services and so put themselves in head-to-head competition with the company that is the country’s biggest telecoms company by market share and the largest wireless carrier, with upwards of 19 million subscribers.

Evidently stung by the lèse-majesté of upstart rivals daring to take on the incumbent behemoth, Penn has come out fighting and claiming that Telstra is just so much better than anyone else at understanding its customers than any energy utility could ever be. Cue hollow laughter echoing around The Lucky Country from Abercrombie Caves, New South Wales to Zeehan, Tasmania and everywhere else in between. 

At an investor briefing yesterday, Penn said given that broadband and Internet connectivity is now regarded as an essential a service as the provision of electricity, Telstra should parlay its ability and expertise to sell sparks and gas to its subscriber base as well as comms services. He claims they’ll be on stream to the public by the end of Telstra’s current financial year.

The operator already has legal authorisation to sell electricity and natural gas in New South Wales, Queensland, South Australia and the Australian Capital Territory (ACT), which is the small area around Canberra which is Australia’s national capital territory (pretty much along the same lines as Washington DC in the US) and is sited in the Southern Tablelands district of New South Wales. Telstra is lobbying to gain the same permission in the state of Victoria.

The proposed evolution into the energy sector seems to be a serious play and marks a strategic changes for the telco. Telstra went carbon neutral last year and has made much of its green credentials and pledges to reduce its carbon footprint. By offering electricity and gas connectivity Telstra will be hoping to up its portfolio of services and so improve monthly ARPU and reduce subscriber churn. Telstra’s aim is to be a “Top 5” energy retailer with more than 500,000 customers on its rolls by 2025. However, the hype is hedged-around with a touch of reality. The telco admits that its move into the energy supply sector will be careful and that customer uptake will be “measured rather than explosive” - and unfortunate choice of descriptor for an aspirant gas company.

Ben Burge, the man running Telstra’s energy business, says it’s easier for a telco to move into energy provision than it is for an energy company to move into telecoms. He commented. “In telco, particularly in the mobile experience, you are literally purchasing a differentiated experience. For an energy company to ponder ‘am I going to take seriously the entry into telco’ - you’ve got to enter into that battle and be prepared to compete otherwise you are picking up a reseller position with a thinner margin and less scope for differentiation.”

Meanwhile, to disabuse investors that he might try to turn Telsta into an actual producer and generator of electricity and gas, Penn reassured them that there is no intent to be anything more than a reseller. Sighs of relief all round. 

Diversification is part and parcel of Telstra’s new T25 strategy. Under the new plan the telco will also move into another “ new market” the health sector - within Australia and internationally, including the UK. That might not go down too well with the Brits who hold the UK’s free National Health Service very close to their hearts. Even after more than a decade of politically expedient austerity and squeezed budgets has resulted in severe staff shortages and longer waiting times for elective treatments the NHS is still regarded as the jewel in the crown of British civic society and civilisation.

Yesterday’s “T25 Telsta Investor Day” was based on a 58-slide, jargon and acronym-packed presentation that ran the gamut of Telstra’s aspirations from soup to nuts. The new strategy will come into effect from next July and is presented as the logical next step from the still unfinished T22 plan which was/is centred on digital services, restructuring and cost savings. In that later regard Telstra made A$2.8 billion by selling 49 per cent of its towers business.

Penn told his audience that the successful completion of T22 and the implementation of T25, will “underpin our future growth and shareholder value” adding, “If T22 was a strategy of necessity, T25 is a strategy for growth,”- except that the strategy calls for a lot more slimming down, belt-tightening and cost savings. An extra A$500,000 worth this time around. It’s not as bad as the A$2,7 billion cuts that came with T22 but the pain isn’t over yet.

Among the welter of information and promises is the pledge that 5G, which now “reaches” three-quarters of the Australian population, will be extended to cover 95 per cent of the population over the next five years. Testa also says 80 per cent of all mobile traffic will be on 5G by financial year 2025 and 4G coverage will be at 100 per cent of the network by financial year 2024. Additionally, planning for 6G will be well under way by the end of the period covered by then T25 strategy. 

Ten “Key Trends” shape Telstra’s future technology strategy: RAN virtualisation, satellite networks, the move to cloud and cloud to edge, dedicated networks for industry verticals including 5G standalone, private networks, energy efficiency, cybersecurity, digital identity and data sovereignty, automation, data, artificial intelligence and machine learning, ecosystem integration, hybrid working from home and office and shifting applications and demand requirements following therefrom and native digital customer expectations and experiences. That’s a lot to be going on with for a strategy that doesn’t go live until July, 2022 and ends in 2025.

In the end, of course, the proof of the success or otherwise of the T25 strategy will be money: revenues, profits, stock price and dividends. When Penn took over as is the CEO of Telstra back in 2015 the share price was A$6. By 2018 it was A$2.50, now it’s A$4 after all the restructuring and cost cutting. Penn and Telstra will be hoping the strategy pays off and the stock price rises. Much will ride on the pledge to provide “an exceptional customer experience” which will place high reliance on technology such as AI and predictive analysis to provide better customer care and increased customer satisfaction from within Australia itself rather than from overworked and underpaid call agents overseas, and replaced the disinterested, rude and dismissive Telstra jobsworths of the Kafkaesque bureaucracy who delighted in making Telstra’s infamous customer interactions some of the worst in the world.