How Optus Wholesale is tackling the industry’s ROIC challenge

The following article is derived from the speech presented by John Castro, our Vice President of Optus Wholesale and Satellite, at the CommsDay Wholesale Congress 2023. It captures the essence and key points of his address, providing valuable insights into the telecommunications industry.

Arguably one of the most important things in our lives today is our mobile phone; or more accurately, connectivity. It fuels economic growth and productivity and is a driving force in connecting people and businesses, enabling innovation, transforming industries and improving lives.

And in line with its dominance in our lives, the telecommunications sector has seen exponential growth in data usage and the proliferation of new digital services over the years.

In fact, the Tech Council of Australia estimated that technology sector activity contributed $167 billion to Australia’s GDP in 2020-21, or what is the same, 8.5% of the country’s total economic output.

The industry’s value challenge 

Unfortunately, however, the industry’s collective ability to charge for these services has not kept pace with the skyrocketing data consumption and usage.

As speed and data capacity have grown in leaps and bounds, the reality is that prices haven’t risen in line with the growing value this is delivering to end-users.

The industry is guilty of collectively conditioning the market to expect more for less, and it’s imperiling our ability to sustain the investment levels needed for the quality infrastructure we have come to rely on. This goes to the heart of our challenge.

A recent Venture Insights report demonstrates this point, finding that despite a dramatic improvement in capacity, the CPI index for ‘Telecommunications Hardware and Services’ has fallen 24.6% since June 2012, while the overall CPI index rose 32.6% over the same period.

Simply put, most things have become more expensive, except for the bundle of services provided by our industry, which has fallen 24% in that 11-year time period.

Devices like the smartphone, together with the crucial and core infrastructure services needed to underpin the modern digital economy, has grown in importance while being systematically undervalued by the telco industry that provides it.

It’s time to challenge the complacency that has crept into the industry because more, not less, investment is needed to continue to innovate and keep up with advancements in technology. 

Optus is tackling the industry’s ROIC challenge 

Venture Insights has found that the industry’s ROIC performance has been weak in recent years and will require significant revenue growth to attract more capital to the industry. In short, telecommunications businesses need to be more profitable to continue to invest. And this applies equally to network operators and non-network operators alike. There are hardly rivers of gold in the MVNO and fixed service provider markets at the moment.

The solution to lifting industry profitability is of course multi-faceted. Optus Wholesale is working to address this challenge by supporting Service Provider partners to be more successful in the market by adding value to their businesses.

There are three important levers at our disposal:

1. Supporting partners to grow their revenues and succeed in new customer segments.
2. Helping partners become more effective and lower costs.
3. Delivering superior customer experience outcomes to our partners and offering non-price differentiators that help reduce churn.

 Improving the revenues for service provider partners

Finding new customer segments to pursue is vital in a highly penetrated and mature market.

With Mobile, Optus Wholesale believes that Fixed Wireless Access (FWA) utilising the Optus 4G and 5G networks presents one valuable opportunity. Delivering fixed broadband-like speeds and data allowances to customers with the flexibility of a mobile service, Optus Wholesale offers this capability across the 4G network and more than 3,500 operational 5G sites.

FWA has been a successful product for network operators in every market its been released, as Service Providers are able to market it to specific customer segments who need portable solutions or don’t want to deal with the hardware, or hard work, of a Fixed installation.

FWA need not be the sole domain of network operators, and Optus Wholesale partners can now target these customers, customising speed plans to appeal to different customer needs.

Similarly, in the Fixed market, we see potential for Service Provider partners to better serve the few segments that are exhibiting growth in a mature marketplace.

In particular, Optus Wholesale sees a role for itself as the enabler-of-choice for Service Provider partners operating in the cPaaS (Communications Platform as a Service) market - with solutions that enable voice, numbering services and A2P messaging for SMS and MMS.

The CPaaS market’s growth is driven by the volumes being generated by true omnichannel experiences that are belated fulfilling their potential, and driving growth online as legacy engagements are digitalised.

Wholesale Service Provider partners should be able to tap into that demand.

Helping service provider partners contain costs 

eSIM is a good example of Optus’ efforts to help partners contain costs. With tight margins in a highly competitive mobile market, Optus Wholesale has focused and invested significantly on providing Service Providers with eSIM capability to begin removing complexity and cost from their businesses.

In a mobile world of e-billing and digital services, the logistics involved with the physical distribution of a plastic SIM card is just about the last analogue element of the customer experience. It certainly remains a costly component of customer acquisition.

Physical SIM card design, branding, acquisition, warehousing, handling, packaging and postage represents a significant cost for Service Providers and can add anywhere from $10-$25 per service to already high customer acquisition costs, by Optus Wholesale estimates.

In addition to the removal of entire supply chain processes and costs, eSIM can help eliminate other indirect costs, including those associated with resolving technical issues that are more prevalent with physical SIM cards.

Optus Wholesale has also focused over the last 12 months on Digital Operations, investing in simplifying and streamlining internal processes and functions to benefit our partners. Digital tools are critical in modern telco business for providers and customers, creating a better and more efficient experience for staff and our customers.

Case in point: Service Providers can submit faults and perform initial troubleshooting through our portal, doing away with the concepts of service emails and calls between operations teams. Additionally, our OWS automation journey and process redesign has reduced the errors inherent in multiple operational touchpoints and dramatically reduced queueing and handling times. 

Improving the customer experience for our partners 

Optus Wholesale adds value for its partners by working collaboratively to design and deliver services and features that improve the end-customer’s experience. By focusing on the retail CX, Optus Wholesale knows that our partners can make their services in-turn far more compelling and stickier, directly reducing churn events.

For instance, Optus Wholesale offers mobile backup services to mobile customers who additionally target the nbn residential market, allowing them to issue services and hardware to that market complete with mobile connectivity.

In addition, Optus Wholesale has invested in bringing powerful data analytics to our partners to provide greater network performance insights directly to partners and their customer service teams.

And the recently launched Customer Experience Management tool provides customer service teams with greater visibility of mobile operational performance; arming them with increased access to network maps, instant call and SMS analysis, the ability to drill down to tower level in the event of a network issue and network speed data.

Looking ahead by looking at the beginning 

Finally, it’s worth recalling how the Australian telecommunications landscape has been transformed in the 30 years since Optus first arrived, driven by incredible technological innovations that have fundamentally altered the way we connect, communicate and engage.

Since its inception in 1992, Optus has pursued a classic challenger strategy from day one, which aggressively embraces wholesaling. Optus Wholesale has championed healthy competition and choice within the Australian telecoms landscape.

Fast forward to 2023, our unwavering commitment is evident as we provide Service Provider partners with unrestricted access to our extensive 4G and 5G networks. This dedication not only ensures a level playing field, but also highlights the monumental $40B investment Optus has made in Australia's critical infrastructure. We believe, wholeheartedly, that fostering choice and competition remains as pivotal today as it was at the dawn of our journey.