Despite the emphasis on its $835m profit in fiscal 2014, telecommunications provider, Optus, experienced a five per cent revenue drop and is being urged to “supercharge” its “challenger spirit” in the interests of competition in the Australian telecommunications industry.
That is according to Dean Lockwood, director at Melbourne-based telecommunications consultancy, Telco7, who published an open letter directed at Optus chief executive officer (CEO), Paul O’Sullivan, in which he claimed the telco’s “declining revenues mean the company is shrinking and therefore less relevant to the market.”
“While Telstra is to be congratulated for its successes in the market, its dominance is not good for market competition and therefore, not good for customers and not good for product and service innovation,” Lockwood said.
His concerns lie predominately on the National Broadband Network (NBN) and mobile fronts.
He claims Telstra’s relationship with the Federal Government via its position in the “watered-down” NBN will lead it to capitalise on the outcome of those negotiations to favour its shareholders.
“I expect that will end up making the already cash-rich Telstra even richer,” Lockwood said. “If Optus’ intention is to try to prevent Telstra from becoming even more dominant, SingTel [Optus’ parent] will need to dig deep, very deep.”
As such, Lockwood believes Optus’ time to be vocal is running dry, particularly with the May budget leading Minister for Communications, Malcolm Turnbull, to accelerate the conclusion of NBN agreements.
In regards to the mobile market, Lockwood said Optus’ focus on customer quality rather than customer count will allow Telstra to maintain its leadership.
“In the past, intense competition in the mobiles market did wonders for Australian consumers and was held up internationally as an example of success. However, the benefits of competition are decreasing rapidly.”
But Lockwood does not place blame on O’Sullivan. He said while Optus lost its “leadership position” (in this case referring specifically to the mobile market) over the past two years, it occurred before O’Sullivan’s time.
Simultaneously, he states, “many of those responsible may have since left Optus, but it is now for [O'Sullivan] to rectify the situation.”
Updated 11:40am, June 2:
While not directly admitting it agrees with Lockwood, Vodafone said it "remains concerned that the regulatory regime continues to protect Telstra from competition."
Vodafone public policy general manager, Matthew Lobb, added, "This has undermined the incentive for competitive investment and has resulted in consumers being subject to higher prices and no real price or service competition."
He also said the government must continue to take action to overcome key market failures and redress imbalances in the competitive landscape in order for consumers to benefit from a converged telco market.
Lockwood and O’Sullivan have been contacted for comment.
Telstra refused to comment.