SingTel Revamps Optus in Australia on Telstra Comptition

SingTel CEO Chua Sock Koong
Chua Sock Koong, chief executive officer of Singapore Telecommunications Ltd. Photographer: Munshi Ahmed/Bloomberg

Singapore Telecommunications Ltd. is revamping its Australian unit, where a drop in revenue and customer spending prompted Southeast Asia’s biggest phone operator to forecast its first annual sales drop in 13 years.

SingTel, as the phone company is also known, reduced the workforce at Optus in Australia by about 10 percent and is changing how it sells to consumers, Chief Executive Officer Chua Sock Koong, 55, said in an interview yesterday. Customers will see more Optus-branded distribution channels, she said.

Optus, competing with Telstra Corp., is cutting licensing to other retailers and adding its own stores to compete with its rival, which has rolled out faster mobile-phone networks to expand market share. Yesterday, SingTel said full-year sales will fall by a “low single-digit” rate compared with an earlier forecast for an increase, citing competition and lower revenue in Australia.

“They’re looking at various cost-efficiencies and ways to drive revenues further in Australia,” said Sachin Gupta, Singapore-based analyst at Nomura Holdings Inc. “They’re competing against a very well entrenched incumbent. So it will be a gradual turnaround.”

The carrier declined 1.3 percent to S$3.12 in Singapore trading today, after dropping 0.9 percent yesterday. The shares have gained 1 percent this year, lagging behind the 11-percent advance for the benchmark Straits Times Index.

Fewer Brands

SingTel’s Australian unit wants to consolidate more retail sales under its own brand. That’s a change from its previous strategy that allowed companies such as Boost Tel Pty. to access its network and sell services and devices under their own name rather than Optus.

Optus will end the license of Boost from January, according to an Oct. 30 statement. A distribution agreement with TeleChoice, SingTel’s biggest third-party retailer in Australia with more than 150 outlets, will end in March so the company can focus on its own network by adding 33 stores, it said.

“There’s been a series of initiatives,” Chua said. “We’ve continued investment in customer-fronting staff.”

Chua spoke after the company reported second-quarter profit that missed analyst estimates as competition with Telstra and a the third-ranked Australian venture of Vodafone Group Plc and Hutchison Whampoa Ltd. crimped growth at Optus, SingTel’s biggest unit by sales.

Telstra Expansion

Melbourne-based Telstra has boosted its customer service, rolled out a fourth-generation network in Australia’s biggest cities and trained workers to provide more expert advice in stores to retain customers for multiple services such as phones, Internet and wireless devices.

“Optus continues to lose revenue share to Telstra, an area we believe needs to be addressed,” Navin Killa, an analyst at Morgan Stanley, said in a report to clients yesterday.

Optus started fourth-generation services in Sydney and Melbourne in September, about a year after Telstra began its 4G services using the Long Term Evolution, or LTE, standard. Telstra has 820,000 devices connected to its 4G network, analysts at Morgan Stanley said in an Oct. 31 report.

Optus Consumer Australia Chief Executive Officer Kevin Russell declined to comment on 4G subscriber numbers on a conference call yesterday.

Lower Spending

Second-quarter Ebitda at Optus, Australia’s No. 2 phone company, was “stable” at A$560 million ($585 million) while revenue dropped 4 percent as customers spent less. Average revenue per user on postpaid mobiles fell 12 percent while spending on prepaid phones dropped 2 percent, the company said.

“We’ve also been restructuring the business,” Chua said. “Over the years, we’ve probably taken the workforce down about 10 percent but we’ve continued investment in customer-fronting staff.”

SingTel’s annual revenue last had a year-on-year decline in the 12 months ended March 2000, according to data compiled by Bloomberg, which is before it bought Optus. Annual sales have beaten analyst estimates in each of the past five years.

The company owns all of its Singapore and Australian phone businesses in addition to minority stakes in six other mobile operators with 468 million customers in more than 20 countries in Asia and Africa. The company’s stake in Warid, a Pakistani phone operator, has been termed as “asset for sale” since July, the company said yesterday.

SingTel is “working through” with its Indian affiliate Bharti Airtel Ltd. to introduce the Amobee advertising platform, Chua said. The company had earlier introduced it to PT Telekomunikasi Selular in Indonesia and Globe Telecom Inc. in the Philippines, Chua said.

New Revenue

Chua, who joined the company in June 1989 as a treasurer and became chief financial officer in April 1999, was appointed group CEO on April 1, 2007, according to the company’s website. She holds a bachelor of accountancy degree from the University of Singapore.

As the CFO, Chua helped manage the company’s international expansion into Australia and India under then CEO Lee Hsien Yang. Chua was paid S$4.9 million last year, 9 percent more than a year earlier, according to the company’s annual report.

“We are very focused on growing new revenue streams,” Chua said. “The focus on acquisitions has slowed down for most telcos and it’s really more focusing on your phone operations and making sure you’ve managed those operations well.”

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