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Data Booms Down Under

Mon, 12/31/2007 - 8:06pm
Brad Smith

Former US West, Orange CEO brings new life to Australia’s largest carrier.

In the last few years, Sol Trujillo and his photograph have spent so much time in newspapers and on television, you might think he was running for political office. As CEO of Telstra, Australia’s largest telecommunications company, he does spend a lot of time campaigning. But he’s selling the company’s story and not seeking office, at least not yet.

Sol Trujillo
Sol Trujillo

According to the Dow Jones media database Factiva, Trujillo is invariably one of the most talked-about CEOs in Australia. That’s not surprising, given that Telstra is one of the 10 largest companies in the country and has been making a lot of news itself since Trujillo was brought in to turn the company around in 2005.

Trujillo likes to call Telstra a media and communications company because it provides content and services as well as telecommunications. Telstra is a communications conglomerate, with fixed, cable TV and mobile divisions. It serves 9.8 million subscribers on fixed line services and 9.2 million on mobile. It recorded $23.7 billion Australian (about $20.9 billion U.S.) in revenues in the last fiscal year ending June 30.

What Trujillo likes to talk about the most, though, is the success of Telstra’s 3G network. The carrier launched the network nationwide (all on the same day) just over a year ago and now owns a 44% 3G market share against Vodafone, Hutchison 3, Singtel Optus and Virgin.

Trujillo, in an interview during a recent trip to the United States, said Telstra’s wireless business was on the top of his list when he became CEO in July 2005. Telstra was losing market share with its 2G network and Trujillo says he saw 3G and the services it enables as they way to regain momentum. His goals were to build a “real-time” network, provide voice and all forms of data, and make the service simple for consumers to use.

Telstra’s Mobile Data Revenue Growth
Telstra’s Mobile Data Revenue Growth

RAPID BUILDOUT
Trujillo gave his network team 12 months and $1 billion (($833.5 million U.S.) to build out the 3G network across Australia, the sixth largest nation with a land mass nearly as large as the 48 contiguous U.S. states. “Nobody has done that, especially in a country the size of Australia, in less than two or three years,” he says. “We did it in 10 months and turned up the network nationwide in one day. We totally caught the market by surprise.”

The network, using Ericsson equipment, now is capable of downlink data rates of 14.4 Mbps, although the phones and PC cards it uses are limited to 7.2 Mbps. That’s plenty of throughput for video conferencing, streaming live TV, as well as video on demand services.

The 3G network, which Telstra calls NextG, also has pumped new life into the operator’s revenue stream. Thirty percent of Telstra’s mobile subscribers are now on 3G, and 60% of those use a PC or “turbo” card. The average revenue per user (ARPU) for PC card users is $100 a month. The ARPU for all NextG subscribers is $75 a month, $20 a month more than its 2G subscribers. Overall data revenues rose 90% in the three months ending Sept. 30. Where SMS still is the main data driver globally, Telstra now makes more money off non-SMS data revenues.

“We’re the first company in world I’m aware of where our non-SMS data revenue is bigger than SMS,” Trujillo says. This comes from streaming TV, video calls, sending and posting photos, and other data-intensive services, he says, adding that most 3G data consumption is “snacking” on content rather than consuming a lot of data at one time.

Leading Global Peers
Leading Global Peers

GLOBAL LESSONS
The CEO thinks at least some of what Telstra has done can be applied to other countries and regions.
“There are many companies doing benchmarking off what we are doing,” he says, “trying to understand what we have done and the services we’re successful with. We don’t compete in Europe or the United States so we aren’t a threat.”

A believer in research, Trujillo says he surveyed 90,000 Aussie consumers before launching the 3G network, trying to find out what they wanted. “I believe consumers around the world have the same needs; they want to be untethered and want to do what they want wherever they are.”

Trujillo came to Telstra after being CEO at Orange in France. (He also served as CEO of US West before it merged with Qwest.) He says he was trying to do the same things at Orange but didn’t have the smart devices and fast network technology at the time. Back then (2003-2004), he says the smartest handset he could bring to the network was a BlackBerry, which was fine for e-mail.

Telstra’s Wireless Roadmap
Telstra’s Wireless Roadmap

Now, he says, Telstra has construction company customers who use mobile video conferencing to show on-site construction to architects back in the office so changes can be seen or requests made in real-time. Voice is still the No. 1 use for the network, but data is becoming a bigger piece all of the time. TV and video is part of that, although Trujillo says that market is still being developed.

“I don’t know how big that will be,” he says of TV, “but we’re seeing increasing demand.”

Not everything has been rosy for Trujillo while he’s been at Telstra. Part of the reason his name has been in the news so much lately relates to some of the controversies he’s been involved in, including alleged attempts to influence shareholder votes in national elections and the size of his paycheck (nearly $12 million last year with bonuses). Telstra’s share price also remains below what it was when Trujillo arrived.

However, if he continues to have the kind of success he’s had with his 3G network, no one may care about those issues.

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