Telstra's consumer focus is working

David Kennedy and Nicole McCormick
07 Oct 2010

Facing share decline in key consumer markets, Telstra has recently launched a new strategy based on mobile device subsidies and fixed service bundling. At Telstra’s annual analyst event last week, we saw evidence that this is turning consumer performance around. Medium-term success will depend on continued marketing aggression, superior execution, and the response of competitors.

Telstra responds to consumer decline

Facing aggressive price competition in consumer markets, Telstra has seen long-term decline in consumer market share. Retail services in operation in prepaid mobile and fixed broadband actually fell during 2009–10.

In response, Telstra has recently implemented a consumer strategy based on fixed service bundling, new home devices, and mobile device subsidies. It is using IT capabilities to reduce cost of sales by targeting these offers. Meanwhile, it is investing to fix niggling problems with IT, and is implementing a three-year simplification program to cut costs and improve customer satisfaction. A $1 billion war chest supports the strategy.

At its annual analyst event last week, Telstra released July–August SIO data showing strong performance in fixed voice, fixed broadband, and mobile connections. This trend has been established for several months.

The strategy is sound, and if all goes well Telstra’s competitors should be worried. But superior execution will be needed, and the competitors will have their own responses. We expect to see benefits flow to the bottom line only over the next two or three years.

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