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COMMENT Is Telstra another Vodafone In The Making?

The constant collapse of the so called bullet proof Telstra mobile network has come at the worst possible time for Telstra who after parting Company with former CEO David Thodey is now facing a torrid future.

Their recent network outages have done lasting damage to its reputation and the worst may not be over, according to analysts and consumer advocacy groups.

With the Company now facing having to invest in a new 5G network it appears that the Company is also struggling to work out where their future actually lies.

Earlier this month the Company that loves to call itself a technology Company said that they were looking to sell a major share in Foxtel, the move comes months after the carrier launched Telstra TV a technology innovation that competes head on with Foxtel.

Despite a fanfare launch Telstra have not said how well Telstra TV is actually going or whether it is simply another means for consumers to lock onto Netflix which after 12 months operating in Australia has totally trounced Telstra’s attempts to set up a streaming network.

A new poll puts streaming services Netflix and Stan ahead of Pay-TV provider Foxtel in terms of overall customer satisfaction and value for money.

The new research from customer satisfaction specialists Canstar Blue of 2,000 consumers put global giant Netflix top of the list for satisfaction and value for money with five stars each, with Stan second with four stars in each ahead of Foxtel, which only managed three stars.

Perhaps more worryingly for the Pay-TV provider its streaming service Presto got lower ratings in categories such as range of content, ease of sign up and new release availability than terminally sick Quickflix.

ChannelNews understands that Telstra is desperate to hold onto consumers and recently hired a big data specialist to dig deep into Telstra sales and customer data in an effort to find what one insider said was a “sweet spot”.

This year the marketing department at Telstra has faced sweeping changes since the exit of Thodey.

Former Microsoft executive Inese Kingsmill and Andy Batemen both opted to leave the business after their roles were abolished.

Kingsmill told Mumbrella she had looked at a number of opportunities within Telstra but had decided to move on.

Kingsmill said the highlight of her time at Telstra was the transformation of the brand under the leadership of former CEO David Thodey.

In less than two months Australia’s largest, and most expensive, mobile phone and internet service provider who at Christmas time took a week to fix a broadband supply problem has had to contend with several parts of their network failing.

These are the same sort of problems that bought Vodafone down in 2011.

These outages led to 2.4 million customers (23 per cent of the total) leaving the company over the next three and a half years, many were picked up by Telstra. Now Vodafone is moving to bring those customers back with what they describe as a “more reliable” network.

Telstra CEO Andy Penn said recently “One outage is not good, is not acceptable, but two is absolutely not acceptable,” Mr Penn said after the second network issue, adding he is “sincerely sorry to all our customers”.

He forgot to mention the two other outages that left customers stranded for hours without mobile connectivity.

But customers tend not to quickly forget this sort of thing, especially when it comes time to renew their contract, according to Deutsche Bank analysts Craig Wongpan and Peter Milliken.

“We expect the financial impact (to Telstra) would most likely occur over a 6-18-month period when contracts come up for renewal, as we do not believe customers would incur the cost of existing contracts early,” the analysts said.

Several analysts are questioning Penn’s ability to turn Telstra around the boards decision to dell the majority of its holding in Foxtel.

It appears everybody remembers Telstra chief executive, Sol Trujillo’s decision NOT to sell the company’s directories business – which was essentially the Yellow and White pages.

This decision led to massive losses for Telstra’s Sensis business.

Insiders are tipping the Foxtel has well and truly peaked and unless the Fox Sports and Foxtel operations are merged the operations will be sunk by overseas competitors.

Fairfax Media said that the rise of Netflix was already evident five years ago.

To have sold its investment in Foxtel a few years back would have been brilliant – smart – ahead of the curve.

Instead Telstra was busy pitching further investment in media as part of its growth strategy. Sure after investigating buying Nine and even Fairfax, Telstra was smart enough to avoid old media.

It wasn’t until Netflix launched in Australia last year closely followed by a couple of new video streaming services like Presto and Stan did the potential damage to Foxtel force a rethink.

In the face of Foxtel having to savage the prices of its subscriber services (which incidentally worked to boost subscriber levels) but weaken profits, its vulnerability to competition is now clear.

As their share price falls many analysts believe that Telstra is simply too large to grow earnings in any meaningful way other than by acquisition.

Recently the Company was looking at an investment in the Philippines but that deal was canned due to “too much risk”.

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