Struggling To Get An ROI On Their 5G Investment, Telstra Is Back Chasing ‘International’ Deal
As their business goes sideways in Australia and CEO Andy Penn spins out stories in an effort to mask problems at the big Telco it’s now been revealed that Telstra is now looking to muscle into the International market again in a desperate effort to find growth according to sources.
Currently management at Telstra are struggling to get a return on investment from their costly investment in 5G, which is being sold at the same price as 4G, they are also facing problems trying to reel back the commissions they pay to JB Hi Fi who has stripped business away from the carrier, during the past 36 months.
Now it appears that their latest PR initiative is an attempt to get back into the International market.
As one observer told ChannelNews “Telstra is struggling to stay relevant, management don’t know how to get a return on their 5G investment because consumers don’t care whether they are on a 5G or 4G network. There is no price difference between 4G and 5G, so Telstra is basically giving 5G away for free while still having to carry the capital cost of investing in 5G technology”.
“The business is having to make massive write offs and they are desperate to cut commissions to retailers such as JB Hi Fi”.
Now the new buzz word at Telstra is ‘International’.
A visit to the Telstra Global web site claims that the Australian carrier is today operating in over 20 countries outside of Australia, providing services to thousands of business, government, carrier, and OTT customers.
They claim that Telstra Enterprise is a division of Telstra that provides data and IP networks and network application services, such as managed networks, unified communications, cloud, industry solutions and integrated services. Telstra Purple, our new professional and managed services business in Australia, Asia, and the UK, brings together people and innovative solutions to define and deliver a clear vision of our customers’ transformation journey, network foundation, and the protection they need to thrive.
David Thodey who was CEO before current CEO Andy Penn wound down Telstra’s International business because of ‘little chance of success’.
According to the SMH Telstra executives are now advanced talks with a private equity firm to combine its international division with Hong-Kong based operator PCCW Global.
Industry sources familiar with the talks, who spoke on the condition of anonymity said Telstra has been in talks for months with I Squared Capital. The move comes as Telstra continues to sack staff and sell off assets in Australia, they are also attempting to take back their franchised Telstra Shop operation.
In 2009, David Thodey rose to be CEO of Telstra. He stepped down in May 2015, having rescued the telco’s flagging share price the role was then handed over to Penn, who is well known for spinning yarns in an effort to mask the current problems at Telstra.
The latest leak is a move back to International operations despite there being no clear vision of how Telstra will make money overseas claim observers.
Back when Thodey ran the business Telstra was A$80 billion telecommunications company.
When word spread of his departure, staff, shareholders, and the broader business community were united in praising Thodey as an effective and easy-going CEO who has built a formidable legacy which under Penn is struggling with tens of thousands being laid off and assets sold or restructured.
Penn, succeeded Thodey on 1 May 2015 since then the business has lost share in the broadband and mobile phone markets and complaints by consumers have risen.
While Thodey oversaw a steady and sustained climb in Telstra’s share price to a 14-year high. He implemented a company-wide cultural shift towards better customer service and resurrected negotiations with the Australian Government over the A$11 billion National Broadband Network (NBN).
On the other hand, Penn is constantly whinging about the NBN and its impact on Telstra revenues.
He also recently moved to take back control of Telstra Shops after the business was fined millions for poor customer service following an extensive investigation by the Australian Competition & Consumer Commission.
Recently he announced a new holding company and spin-off its international division into a new subsidiary, a restructure designed to help Telstra squeeze more value out of its assets.
The focus of that restructure was on the InfraCo Towers division, which chief executive Andy Penn had publicly disclosed he wanted to sell all or part of.
The restructure is expected to be completed by the end of the year according to the SMH.
It now appears that Telstra and venture capital group I Squared Capital have jointly lobbed a bid for PCCW Global.
Before Telstra was separately looking at buying PCCW Global, a unit of Hong Kong Telecom. The sources said the talks advanced to the PCCW Global data room, but no formal bid was made.
According to the SMH, I Squared Capital hired former Telstra executive and consultant Martin Blanken to represent it during the process, they said. Mr Blanken, who left his role as executive director of global sales, international, at Telstra in 2018, declined to comment.
A spokesperson from Telstra said it does not comment on speculation related to mergers and acquisitions.
The talks were still occurring at late as February, the sources said, but it is unclear if they are still underway or if Telstra is speaking to other private equity firms about a potential strategic deal.
I Squared Capital is a global investment manager that focuses on a variety of sectors including telecommunications. The firm separately looked at buying PCCW Global before considering a tie-up with Telstra International.
Telstra shares were trading at $3.41 down from $3.48 at the start of the week.