Optus takes the fight to Telstra

The perennial second-placed telco has seized on the deep shifts under way in the market with new purpose.

“We absolutely could be No 1 in mobile share over time,” Optus chief executive Kelly Bayer Rosmarin tells The Weekend Australian. Picture: Britta Campion / The Australian

Optus has dusted off its competitive urges with Telstra again firmly in its sights.

The perennial second-placed telco has seized on the deep shifts under way in the market with new purpose.

“We absolutely could be No 1 in mobile share over time,” Optus chief executive Kelly Bayer Rosmarin tells The Weekend Australian.

“I’d love to see it happen because we are so focused on customers that they choose us and they choose to stay with us.”

Optus has just under 30 per cent of the mobile market in Australia compared to Telstra’s 40 per cent. While the gap has been fairly steady in recent years, Optus is also feeling the heat from behind.

It is facing a new challenger in the form of an invigorated Vodafone after its merger with internet heavyweight TPG.

The South African-born Bayer Rosmarin was one of several executives who left Commonwealth Bank after the departure of Ian Narev.

She joined the Singaporean-owned telco as deputy CEO in February last year, and took over as Optus chief in April this year during the COVID pandemic.

She replaces Allen Lew, who had run Optus since 2014 and had got the ball rolling on 5G upgrades.

While market watchers were surprised at her move from banking to telecoms after nearly 15 years at CBA, Bayer Rosmarin studied industrial engineering and management science at Stanford, doing a bachelors and a masters degree, before moving to Australia. Prior to CBA, where she ran the bank’s institutional business, Bayer Rosmarin was a consultant with the Boston Consulting Group, and spent time with start-ups in Silicon Valley.

Optus has already ruffled Telstra feathers with its new “Yes” advertising campaign directly challenging recent price increases and pointing out that it will be keeping its prices steady until the end of the year. Bayer Rosmarin said her mission was to grow market share and “build shareholder value”.

Grow market share

“We do want to grow market share,” she says.

“We are a challenger and we have got a great product so we should be winning market share.

“But we also want to do it in a profitable and sustainable way so we can keep investing in the latest and greatest technology.”

Bayer Rosmarin admits that the onset of COVID has put the telco under cost pressure at a time when it has lost key revenue sources from international roaming and selling prepaid SIMs to students and travellers.

Optus will push the NBN for more concessions once the pricing deal with telcos ends in September. At the height of the COVID crisis, NBN Co offered telcos more capacity at low rates because of the massive surge in demand for data with people working from home.

“There’s a lot that needs to be discussed between the telcos and NBN Co.

“The NBN just announced a really good profit,” she says, in reference to NBN Co’s full year earnings of $1.76bn outlined this week.

She says Optus was pleased that the NBN had announced pricing concessions during the pandemic, but telcos would want to see continued concessions as the pandemic was still affecting usage patterns.

“They (the NBN) announced a partial price break, based on some criteria, which was very welcome,” she says.

“We were very supportive. This thing (the pandemic) hit very fast here, patterns changed and people started using more (voice and data).

“Hats off to the NBN for leading that, but those patterns are here to stay for a long time.

“Telling an industry that was already putting the NBN on notice that its profit levels were unsustainable — and thinking that prices were just going to go up and they were going to take away their support and profit from what is going on — that needs a good debate in the industry.”

Bayer Rosmarin says while Optus will be pushing for continued pricing concessions from the NBN it also wants better service for its customers.

“If they deliver a better experience, then we get less phone calls and its costs less to support the whole thing. We don’t need to send as many technicians out.

“We are focusing on lifting the customer experience with the NBN so customers are happier.”

Bayer Rosmarin says the pandemic has seen an increase in voice traffic as well as data usage.

“Voice was the surprise factor,” she says.

“It had really been in decline for many years, but it has been up by around 20 per cent.

“People started spending more time on the phone, calling people they loved or, in some cases, calling government health lines.”

She says people are making fewer calls but talk longer, in some cases up to 70 per cent more than normal.

Optus saw a shift in data usage during the day away from CBD areas and towards the suburbs, particularly in Sydney and Melbourne.

While there was an increased usage of data for downloading, up by about 20 per cent, there was also an increase in uploading of 40 per cent.

“If you are using collaboration tools at home you are actually uploading as well,” she says.

More revenue for telcos

Bayer Rosmarin rejects suggestions that the increased usage of data automatically translates into more revenue for telcos.

“You might expect that as people are using more data they are actually paying more.

“But the way things are structured in Australia, our customers already had unlimited data on their wi-fi plans.

“We had already been leading the market with generous data allowances in our phone plans, so there wasn’t a need for people to use more.”

Selling prepaid SIMs to visiting tourists and students is one revenue stream that has almost disappeared.

“It has been quite a big financial and business impact for us to adjust to (the pandemic) — not to mention the different patterns of foot traffic in our stores and different patterns of buying,” she says.

Most of Optus’s 350 stores around the country are open.

The company initially closed 39 in the Melbourne area in response to the latest lockdown but, following some clarification of the rules, has reopened 23 of those “on an appointment basis” this week.

One of the first challenges she faced after taking over as chief executive in April was a serious disruption to its call centre operations in The Philippines and India as workers in those countries were hit by restrictions.

“At one stage — almost overnight — we lost 90 per cent of our call centre capacity,” she says.

With some 300,000 to 400,000 customer calls a week, this proved a major challenge.

“We had a pivot and a brainstorm. We decided we would train all our store staff to be able to do customer care in the stores,” she says.

What was originally a six-week training course for customer care call centre workers was condensed into two-hour modules over three or four days.

“We had our 2000 store staff able to help with customer care,” she says.

“We also hired people who had been stood down from Virgin, Qantas and Flight Centre.

“It was a time of huge disruption but also huge strategic agility and innovation in the company.

“It was a strange way to become chief executive, but it also forged the team together and meant you were having an impact from day one.”

She spends most working days at Optus’s campus-style headquarters in Macquarie Park in Sydney’s northwest.

Her Sydney staff are split into two teams — yellow and teal after Optus’s corporate colours — to keep distancing in the workplace. Staff in Melbourne remain at home aside from essential workers.

New sports rights

As a result of the experience, Bayer Rosmarin says Optus, which has some 5000 staff in Australia, is reviewing its call centre operations, a move which will see more brought back onshore. “We currently have a call centre structure that has 100 different teams.

“People get shunted from person to person. We are trying to think about it completely differently,” she says.

“It’s one of the more permanent shifts we are looking to make off the back of this disruption.”

Bayer Rosmarin is tight-lipped about plans for buying new sports rights.

Optus has carved out a strong niche in the market for European soccer rights, billing itself as “where football belongs”, a move which dates back to a deal by parent SingTel to buy the rights to the English Premier League dating back to 2010.

Optus bought the Australian rights to the EPL in 2015 in a deal reportedly worth more than $50m over three years, in a move which surprised the market. It renewed the contact in 2018 for another three years.

Manchester United fan

Bayer Rosmarin, a Manchester United fan who was a board member of the Football Federation of Australia from 2015 to 2019, says Optus Sport “is going fantastically well”.

“The customer base is very engaged. The product is fantastic. Football fans love it.”

While Optus Sport’s streaming service has some 820,000 subscribers on its own, Optus also includes it in many of its plans.

“It’s a great value-add and differentiator,” she says. “We would never talk about upcoming rights or whatever is under discussion.”

But she points to a potential new area of content for Optus with the recent launch of its second channel — a fitness channel.

“It’s a direct to consumer product for a subscription amount.”

Optus has begun to roll out its 5G services but Bayer Rosmarin sees the true impact being some way down the track.

Optus was dealt a blow by the government in 2018 when it blocked companies from using Chinese telco giant Huawei for equipment for its 5G network.

Optus had been planning to use Huawei because of its advanced 5G technology but was forced to redo its plans, now using Nokia and Ericsson.

Optus is using 5G to provide a home phone for customers who don’t have or don’t want the NBN.

“The benefit of 5G is that it should lead to higher speeds for customers and lower latency,” she says.

“This is important for applications such as gaming, but it also opens up new avenues of remote business like surgery.

“It should enable us to connect a lot more devices, allowing them to talk to each other with lightning fast reaction speeds,” she says.

“But to unlock that, you need to get quite ubiquitous coverage which will take time.”