news The nation’s number two telco Optus will undergo a substantial restructure which will see its long-time chief executive take up a wider role within its parent SingTel, it was revealed today, as SingTel reorganises its Asia-Pacific operation around a series of core vertical businesses rather than its traditional geographic markets.
SingTel has traditionally been largely organised on country-specific lines, with its home country of Singapore and Australia (through its Optus subsidiary) being the main core centres, and other geographies such as India usually operated as offshoots. This has allowed Optus to have a significant amount of autonomy in Australia, despite being part of the wider SingTel group. However, in a wide-ranging announcement today, SingTel outlined a wide raft of changes that will change the way the group is structured as a whole.
From April 1, the company said, its operations as a whole would be segmented into three distinct operations. Group Consumer will focus on SingTel’s consumer customers, including 400 million mobile customers across the entire Asia-Pacific geography. Optus CEO Paul O’Sullivan will be promoted into a new role leading this group.
Group Digital Life will be led by former Optus and current SingTel executive Allen Lew, and will focus on digital services, especially mobile advertising solutions through the US$321 million acquisition of mobile marketing company Amobee also announced today. Through this acquisition and its existing in-house capabilities, SingTel will aim to develop next-generation applications that it can use on top of its mobile and fixed networks to drive the value it gains from its infrastructure higher.
Finally, the company will set up a Group ICT division to target enterprise customers, offering not only communications services but also more traditional IT services such as systems integration and cloud computing. Lew will also oversee this business on an interim basis, while a permanent leader is found for it.
The restructure will also have other immediate impacts for Optus in Australia, with a series of second-tier appointments affecting the company’s top local executives. Current Optus CFO Murray King will become CFO of the wider consumer group under O’Sullivan, Optus director of human resources Vaughan Paul will become regional HR chief, and Optus managing director of technology and products Andrew Buay will become group chief information officer. The individual division chief at Optus will now report directly to their regional counterparts. For example, Optus director of digital media Austin Bryan will report to Allan Lew in his Digital Life role, and Optus business chief John Patiridis will report to Lew in his acting Group ICT role.
O’Sullivan told journalists in a media conference that he would still be the executive who would tie all of the threads together for Optus in Australia, and continue to be the telco’s chief local spokesperson. His backup will be his “second in charge”, recently appointed Optus chief operating officer Kevin Russell.
The broad message O’Sullivan and other SingTel executives such as Lew and SingTel group CEO Chua Sock Koong emphasised to journalists was that the restructure would allow the company to better leverage the scale of its operations while still focusing on local markets.
This would take effect in three areas in practice, O’Sullivan said, speaking with relation to Optus. For starters, the restructure would allow Optus to take costs out of its business. For example, it would be able to obtain better purchasing deals with vendors – such as network equipment and handset vendors. This would aid the company, O’Sullivan said, in areas such as its ongoing rollout of 4G mobile networks, which is occurring in a number of SingTel markets simultaneously. Lessons from each market could form part of a larger whole.
Secondly, he said, SingTel would benefit from being able to develop centralised capability in customer analytics and customer management, such as “recommendation engines” for customers, that would allow it to better understand its customer base. And lastly, there would also be a “scale” opportunity to leverage its Digital Life portfolio across its wider operations.
“SingTel has a long history of quiet, but successfully, making bold and industry-shaping investments,” said group CEO Chua Sock Koong in a separate statement. “We now see some of the largest and most exciting opportunities that have ever existed in this industry. The changes to how we organise ourselves are necessary in order to align our people and resources to sharpen our focus and take advantage of these opportunities.”
To my mind, this is more a reshuffle on paper than anything else. It’s the sort of reshuffle that top-end executives at massive global corporations like SingTel love to carry out, because it simplifies reporting lines and appears to align the whole business along certain key areas which will be core to the business’s overarching focus in the near future. Boards also love these kinds of things.
However, in practice the restructure will have very little impact on the way that Optus operates in Ausralia. To understand why, you have to look at the key lines of work which Optus carries out. What does Optus, as a company, fundamentally do?
At a basic level, Optus builds networks and maintains them; these networks being its mobile network (where most of its focus is), its HFC cable network, and its ADSL, fibre and satellite networks. It sells services onto these networks, to businesses, consumers and other wholesale players. Those services may be low-level telecommunications services, or they may be higher-level content services.
And it really is as simple as that, when you really get down to it.
What SingTel’s restructure today will impact is the way that certain of Optus’s really high-level arrangements operate. I anticipate that much more of the top-level purchasing (contracts worth tens of millions or hundreds of millions) will now be done centrally across the SingTel group, and Optus will have less of a say in how those contracts affect the Australian business. At a high level, engineering and sales executives will need to collaborate more regionally, perhaps on joint campaigns and common network specifications.
But on a practical, day to day level, the way that those initiatives end up being implemented in Australia will not change much. It will still be the same engineers building and maintaining networks in Australia. And it will still be the same commercial sales and distribution staff who sell services on top of those networks, to the same people. And so, although the titles of various things may change, Optus will continue to operate largely as an independent entity and will continue to be structured along these lines: Fixed networks, mobile networks, satellite networks, business (including IT services), consumer, wholesale and admin.
The most interesting thing about this announcement, perhaps, for those who watch Optus closely (as I do), is the extent to which SingTel is actually letting Australian executives penetrate its upper management structure, rather than executives from Singapore. I was surprised during the announcement to hear that several key Optus executives will now take more senior roles in SingTel’s wider operations, such as group HR or IT.
What I think this means is that SingTel sees Optus as a rejuvenating force within its ranks, and is seeking to let that energy and experience cross-pollinate into the wider business. This is somewhat of a departure from the normal culture of acquisitions like Optus by incumbents like SingTel – where SingTel’s mid-level promising executives would be sent down to the subsidiary to get experience and keep it under control by the mothership.
I was also interested to note O’Sullivan’s promotion. It is now very clear that the executive will be handing over much of his daily work at Optus to his new COO, Kevin Russell, who of course led Optus rival Hutchison in Australia for more than half a decade during the early to mid 2000’s and joined Optus in January as O’Sullivan’s heir apparent. A change in leadership at Optus has been needed for some time, and I hope that Russell will be given enough leeway in the company locally (without too much SingTel overhead) that he can make a difference in Optus’ fortunes.
The combination of O’Sullivan keeping SingTel off Russell’s back and Russell rejuvenating Optus’ competitive offering in Australia (it badly needs a better mobile growth strategy and any kind of fixed growth strategy at all) could prove a potent one. However, personally I’m not holding my breath. While SingTel is pursuing synergies across the Asia-Pacific region, Telstra will continue to be eating Optus’ lunch in both the fixed and mobile markets in Australia in the short to mid term. It will take more than a more or less paper restructure for that to change any time soon.
Image credit: Optus