Telstra’s biggest rivals: Google, Apple, Facebook?


Telstra’s biggest competition in future may come not from traditional telcos, but from innovative players like Google, Apple and Facebook, according to one analyst — and the big T may not be prepared for what’s coming.

Last week at the telco’s investor day, its chief executive David Thodey placed a big emphasis on future Telstra offerings in media and cloud computing, citing “the exciting area of network applications and services”, where he said Telstra saw “tremendous growth opportunity”. “We have wonderful media assets that we are going to continue to invest in and we think are very important going forward,” he added.

Just yesterday Telstra revealed it was planning to launch its own Android-based tablet device in November — putting the company squarely in competition with Apple’s iPad device. And like Google, it hopes to woo customers to cloud computing platform.

But speaking in a video interview on the day, Telsyte research director and seasoned analyst Foad Fadaghi said Telstra may not be prepared for the fields that it wanted to play more strongly in.

For starters, Fadaghi said, telco brands were not resonating in the media world at the moment with consumers. “We saw Vodafone quietly close down their online music store recently in Australia,” he said. “They’re a big international brand, and they’ve not been able to go into media effectively.

On the cloud side, Fadaghi said consumers were more used to using Google’s offerings than they were to using similar services from the likes of Telstra. “Consumers want best of breed products,” he said. “They don’t want something that’s just a Telstra version of the same thing.”

The key problem as the analyst sees it is that right now, Telstra and other telcos are seeing their services become increasingly commoditised. Where a customer might have previously connected to Telstra products and services over a Telstra network, now they simply used Telstra’s network for transit to access their Gmail on the road, for example — or YouTube.

“The challenge there is that the likes of Google and others are dumbing down the pipes and trying to assume as much value as they can through those pipes,” he said. “It’s going to reach the point where the telcos will kick up a stink.”

Telstra has recently started to claw back its share of the broadband market — but Fadaghi pointed out that it had done so by cutting prices and increasing download quotas. And Google is also making threatening moves in Telstra’s home ground.

“If you look at Google right now, they have joined the Communications Alliance, which has traditionally been for telecommunications operators,” he said. “So why have they joined — what are their interests in that space?”

Thodey mentioned the potential for Telstra to make acquisitions. Asked what he would buy if he were leading Telstra, Fadaghi said the telco could potentially buy in areas where advertising dollars were flowing, or acquire the intellectual property rights to certain events — in sports, for example.

He also advised Telstra to partner with best of breed companies — in a similar way that channels Seven and Nine have done with Yahoo! and Microsoft respectively to create Yahoo7! and ninemsn in Australia. “Telstra for too long has kind of been out of that game and tried to do things alone,” he said.

Finally, a word for Facebook. During the presentation at the investor day, Telstra played a video with the theme of ‘connecting people’.

“Now connecting people is what Facebook does,” said Fadaghi. “So I’ll be very interesting to see what Telstra is going to do different in connecting people, when people today see the main mechanism for connecting with each other as social networking, which is something that Telstra doesn’t currently provide.”

Video credit: Delimiter


  1. Goddamnit – I wish telcos would stop trying to be a service or an app and just be a utility. Water, electricity and gas companies have a very profitable, very stable business – who doesn’t want to be part of that?

    If Telstra were smart, they’d close down everything not related to the infrastructure related to providing the Internet (e.g: the pipes) and be so damn good at it, at a reasonable price, that everyone in Australia *wants* to use their network over competing networks.

    Telstra (or any other telco) should not be a “Facebook” it should be the platform for which Facebook is on. Without telcos supplying users with reliable, fast and cheap Internet access, Facebook etc, can’t really do much.

    If these companies are so desperate to play in the Web 2.0/gadget sphere, spin off separate companies, or you know what – stop working for Telstra and start your own company.

    *slow breath out*

    • I couldn’t agree more. The problem with telcos is that they don’t like being relegated to being plumbers — it’s not sexy. However, like most tradesmen in Australia, my own plumber (as in, the guy that fixes our toilet), might not have a sexy job — but he does have a licence to print money.

  2. Anthony Agius pretty much hit the nail on the head.

    The problem I see with Telstra is they not only want to be a Telco/internet service provider, but they also want exclusive rights to provide media/content over that network.
    There is nothing wrong with a company diversifying like that, but I do see a potential conflict of interest. (EG: flooding their network with “premium” content, and using QoS as a guise to prioritise it over other peoples content).

    Its the Telco lock in mentality that makes services like Gmail and Ymail so attractive, you can switch ISP’s “and” keep your email address.
    For Telstra to do any good in the apps and service space, they will need to come up with great apps and services that stand alone and are not tethered to their Telco service.

    They should lure people by providing a great service at a competitive price, not by providing a few apps and some exclusive cheesy content.


  3. They’re going to try- and eventually they will either spin it off into a separate entity or scrap it. They will spend tons of money on it either way, most of which they won’t recover for years if ever.

  4. Telstra thinks they have wonderful media assets. What they actually have is wonderful network infrastructure, which they keep sabotaging to try and push their unwanted media assets on their customers.

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