Telecom Asia: How important is the Reach transaction for you?
Phil Mottram: It gives us very good assets to take onboard, and the timing is great because we have strong ambitions around our international business. About a year ago, we started a strategic review of Reach and decided to restructure it and move the majority of the assets over to Telstra International. That deal was completed in on March 1.
What assets are being transferred?
They cover a number of areas, including the transfer of the network assets to Telstra International. In people terms this means more than 300 additional staff. On the network side it gives us additional footprint through undersea cable assets. We also get licenses in new markets such as Korea, Indonesia, the Philippines, Malaysia and Thailand. The growth is now in Asia, so the plan is to leverage existing investments on the region.
Reach also has a strong satellite capability covering over two-thirds of the Earth's surface. This is a good fit for Telstra's Australian customers, such as those in the oil and gas industries. We also are planning to offer this service to the broadcast community as well.
In addition, the voice-trading unit is a kind of a voice minutes termination business on a global basis. We have plans to update and modernize this service with an IP-based platform and angling it to growth markets. This service can address some of the requirements of mobile operators.
How has the need of your customers changed since before the recession, and how has this impacted the assets you obtain and the services you provide?
My feeling is that the market requires more tailored managed services. I think the days of the huge outsourced deals are over. Some large transactions have left customers and suppliers feeling uneasy about those agreements. Some outsourced contracts have not gone well for either party. With that in mind, customers are more educated and thinking through with more detail about what they are buying and who can really deliver it.
With that in mind, we are seeing strong demand for managed services and less for full-blown outsourcing. I think somewhere between the two, we have a reasonable approach when it comes to flexibility around that.
How has that shift impacted your execution? You obviously want to have something off-the-shelf to give to the customer, but then you've talking about tailoring? How difficult is that?
The trick with offering these services is to ideally build as much repeatability as possible to make sure you can do it efficiently, economically. But you can't get away from the fact that you need people who can implement those sorts of projects. The other point to make is that you have to inject a lot of effort into the transaction very early on. The ones that go badly are when people don't put the effort upfront and three months down the line they start to wobble. Six months down the line, there is a crisis. The good ones throw those resources in at the beginning of the project.
What is the biggest challenge for a managed services provider in offering value to enterprise customers?
You need to focus on the right areas. Telecom companies have failed when they run around chasing deals they can't win or deals they can't deliver on. The people who do it right focus on the right areas. What sort of customers is a really good customer for the operator? Just make sure you focus your resources. How can you differentiate, is it around resilience, latency, or are you a good fit? The challenge is lining all these up for the right customers.
What is your overall strategy in the region?
There are three levels to our strategy. The first is around meeting the needs of Australian customers rolling out internationally, like telecom companies. I think there is more we can do. We have captured some of the opportunities, but I do not think we have massively exploited the footprint from within.
The second level is we have the stated ambitions to be one of the top networking providers in the Asia-Pacific region. The Reach restructure and other investments we've made are to support this strategy. We want to be in a position whereby if you've a Korean multinational looking to roll a network across Asia, then Telstra will have the services to support you. This is much like having our very own pan-Asian footprint.
The third level, if you look at it more globally, is we have strong capabilities in the US and Europe that are appropriate to some vertical markets. If you're looking at markets such as wholesale finance, we have locations in London, New York, Hong Kong, Tokyo and Singapore, which is a perfect fit for that sector.
What about in terms of actual services?
We are moving more and more to managed services and cloud computing. Throughout its history, Telstra has had strong hosting capabilities. If you look at the UK, for example, we have three world-class hosting facilities. The same is true here in Hong Kong, where we have data centers. The Reach transaction gives us a bigger footprint and more capabilities.
We have a solid cloud-computing platform in Australia. One of our customers is VISY, one of the largest packaging companies in the world. They are rolling out SAP to 140 locations around the world. We host this application in a Telstra data center. We aim to take this capability in Australia and replicate it on a global basis.
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