Australia’s Telecom Giants: The Future of Competition in the Industry
The telecommunications industry in Australia is going through a period of change, led by several factors. Advances in cloud storage and cloud security, a high Australian dollar, fast-moving smartphone technology and alleged monopolies within the sector are forcing the industry leaders to re-evaluate current business strategies.
To keep you informed, Business Review Australia analyses the top influencers in telecommunications to see where the industry is going next.
Telstra – No Longer in Infrastructure?
Australia’s largest telecommunications and media company, Telestra, has a presence in just about every telecomm subsector, although that seems like it is soon about to change. News broke at the beginning of July that the company has accepted structural separation in the face of the renewed efforts for the fibre-to-the-node network presented by the new communications minister.
With Telstra effectively no longer an infrastructure company, the next move is to figure out their involvement with the continued work on the National Broadcast Network (NBN). Categorisation of the NBN seems to be an acquisition of a previously privatised asset. And since Telstra is participating in building two big pilot FTTN networks in New South Wales and Queensland, involvement in the country-wide FTTN rollout would not be a surprise.
The starting price for negotiations, set in June of 2011, is around $11 billion. A large part of NBN Co’s new budget of $41 billion could end up in Telstra’s pocket after a deal is reached, considering the assets NBN will be acquiring from the company are worth more now than they were in 2011. The government will also be looking to buy Telstra’s hybrid fibre-coaxial cable network and is currently negotiating to also buy the company’s copper.
Macquarie Telecom Downgrades Earnings, But Optimistic
Macquarie Telecom, a managed hosting and telecommunications company with offices all over Australia, also has a lot of changes on the way. In terms of good news, the company recently was awarded the Frost and Sullivan Australian Data Centre Service Provider of the Year award in 2013, demonstrating their commitment to their customers.
Early July sung a different tune when the company announced that it would be downgrading their full year earnings by around $3 million. Several factors contribute to this drop in earnings, including increasingly fierce competition from several other companies, like Telstra. Macquarie Telecom has also delayed several of their large government contracts, pushing the expected revenues from these projects from the end of the financial year 2014 into the first quarter of next year.
"Macquarie Telecom's mobiles business has also experienced faster than anticipated customer migration away from its higher margin offerings to its lower margin platforms," the company said in a statement.
"[Our] dedicated managed hosting customers are progressively moving from its higher cost dedicated managed server infrastructure offering to its lower cost virtual private cloud offering. The speed of this migration has been greater than anticipated over the past six months putting downward pressure on hosting earnings for the half."
Macquarie sees an end to the downgrades however, calling for a balancing out of their earnings in the first half of their 2015 financial year. The cloud-based storage they are currently implementing is less expensive to fund than other storage options, and should offset this year’s slightly lower earnings.
Vodafone Redefining Data Plans
In an industry-first, Vodafone – the British multinational telecom company – is offering its customers unlimited data in the first two months of their updated mobile Red Plans. This move allows the customer to understand their data-usage patterns before wholly committing to their 12- or 24-month contract.
This plan also offers the inclusion of 13 and 1800 numbers, infinite talk allowance, and a change to automated data add-ons.
In conjunction with this plan, Vodafone has also bumped data allowances from the original set limits of their 2013 plans. The 24-month Red Plans will now come in $70, $80 and $100 tiers. These plans offer 3GB, 4GB and 6GB of data respectively (up on the original caps of 1.5GB, 2.5G and 5GB that were included when the plans launched in 2013).
Both Macquarie and Vodafone have taken action - in the form of statements and formal complaints - against Telstra’s alleged monopoly of the telecom industry in Australia.
Macquarie has issued a formal complaint to the Australian Competition and Consumer Commission (ACCC) for bullying other companies and their customers, and an alleged misuse of market power regarding its wholesale partners. Macquarie claims they resorted to the complaint, issued in July, because months of negotiations went unresolved.
The formal complaint details Telstra’s alleged practice of locking regional customers into sub-standard services and limiting their choice of mobile providers. Telstra was supposedly doing this by refusing to provide 4G services to wholesale providers, which led to their wholesale partners offering customers restrictive data caps that were uncompetitive with their own retail offerings.
Vodafone on the other hand, has voiced their concerns to the completion policy review. The company believes that Telstra has a dominance on the telecommunications sector that is detrimental to the public.
"(There is) virtually no effective fixed and mobile competition exists in regional Australia,” said Vodafone. “This is of significant benefit to Telstra, positively reinforcing Telstra's enduring, pervasive, and unprecedented market dominance."
"It is our view that policy makers and regulators in Australia have tolerated a telecommunications market where the incumbent has been protected from effective competition. A high-powered competition policy review and development entity should be created to independently advise the various state and Commonwealth governments and to formally review all regulation against competition principles.”
With Telstra currently under heat from much of the sector, it will be interesting to see how the ACCC responds. Should their operations be declared a monopoly, what effect with that have on their involvement with the NBN project? Only time will tell.
Why Alibaba Cloud is doubling down in Southeast Asia
Alibaba has announced expansion of its cloud business within Southeast Asia, with the introduction of a digital upskilling programme for locals alongside acceleration of its data centre openings.
This doubling down of its cloud business in Southeast Asia comes as the company faces stiff competition at home in China from rivals including Pinduoduo Inc and Tencent and seeks to up its game in a region considered to be the fastest-growing in cloud adoption to compete with leading global cloud providers AWS, Google and Microsoft.
Alibaba Cloud, the cloud computing arm of Chinese e-commerce giant Alibaba and second biggest revenue driver after its core e-commerce business, finally turned profitable for the first time in the December 2020 following 11 years of operation, thanks largely to the pandemic which has spurred businesses and consumers to get online.
Southeast Asia growing demand for cloud
In 2020, there was a noticeable increase in interest towards cloud in SE Asia, with the population embracing digital transformation during the pandemic and SMEs across the region showing increased demand for cloud computing.
Such demand has led to the expectation that Southeast Asia is now the fastest-growing adopter of cloud computing with the cloud market expected to reach US$40.32bn in Southeast Asia by 2025 according to IDC.
And there are plenty of players vying for a slice of the cloud pie. While AWS, the cloud arm of Amazon, is the leading player in Southeast Asia (and across all of APAC apart from China), Microsoft and Google are the next two most dominant players in Southeast Asia with Alibaba coming in fourth.
“There is no doubt that during the past year we have seen the acceleration of digital transformation efforts across all industries,” explains Ahmed Mazhari, President, Microsoft Asia. “Asia now accounts for 60% of the world’s growth and is leading the global recovery with the digitalization of business models and economies. Cloud will continue to be a core foundation empowering the realization of Asia’s ambitions, enabling co-innovation across industries, government and community, to drive inclusive societal progress.”
Alibaba’s commitment to Southeast Asia
At its annual Alibaba Cloud Summit, the Chinese company announced Project AsiaForward, an initiative designed to upskill local developers, small-to-medium-sized companies and connect businesses with venture capital. Alibaba said it would set aside US$1bn over the next three years to develop digital skills in the region, with the aim of helping to develop 100,000 developers and to help grow 100,000 tech startups.
But that’s not all. The company, which recently opened its third data centre in Indonesia, serving customers with offerings across database, security, network, machine learning and data analytics services, also announced it would unveil its first data centre in the Philippines by the end of 2021.
Furthermore, that it would establish its first international innovation centre, located in Malaysia, offering a one-stop shop platform for Malaysian SMEs, startups and developers to innovate in emerging technologies.
“We are seeing a strong demand for cloud-native technologies in emerging verticals across the region, from e-commerce and logistics platforms to FinTech and online entertainment. As the leading cloud service provider and trusted partner in APAC, we are committed to bettering the region’s cloud ecosystem and enhancing its digital infrastructure,” says Jeff Zhang, President, Alibaba Cloud Intelligence.
What other cloud providers are pledging in the region
This pledge by Alibaba to upskill both individuals and businesses follows Microsoft’s announcement in April that it was planning to upskill Malaysia’s population and would invest US$1bn over the next five years to build a new data centre centre in Malaysia.
This is the latest in a long line of pledges to the region by the US tech giant, which is fast accelerating the growth of its cloud datacenter footprint in Asia, expanding form seven 11 markets, and recently adding three new markets across Asia – Malaysia, Indonesia and Taiwan. Back in February, it announced plans to establish its first datacenter region in Indonesia and to skill an additional 3 million Indonesians to achieve its goal of empowering over 24 million Indonesians by the end of 2021.
And recent research by IDC shows that Microsoft’s most recent datacenter expansions in Malaysia, Indonesia and Taiwan alone are set to generate more than US$21bn in new revenues and will create 100,000 new jobs in the next four years.
Also last month, Tencent announced it has launched internet data centres in Bangkok, Hong Kong, Tokyo to add to its second availability zone opened in Korea last year and plans to add an internet data center in Indonesia, and Google has also been pushing into the enterprise space in Southeast Asia for several years now.
Expanding data centers allows cloud providers to boost their capacity in certain countries or regions.