The appointment of Vicki Brady as the new CEO of Telstra is an opportunity to usher in progressive changes for the company, writes Paul Budde.
THERE WERE NO INDICATIONS that Andy Penn would retire as CEO of Telstra, but obviously, internally they have been working on this for some time. Telstra is really good at organising smooth internal CEO successions. It has an excellent pool of talented C-level people and there is no longer the ego element that, for example, played a key role in Telstra’s leadership with Sol Trujillo in the mid-00s.
The selection of the talented CFO Vicki Brady clearly indicates steady as she goes. There won’t be any major changes to the company’s direction going forward. Andy Penn is also a financial person and he is a realist. He concentrated on what Telstra was rather than what it could be.
If we look at the massive investment failures of the company in the period 1990–2005, then we could classify that period as one where Telstra wanted to be another company. It was also seen by the investors as a potential new tech company on par with the digital giants that started to emerge at that time. Most of those investments based on that vision failed and its share price dropped significantly.
Mr Penn saw Telstra for what it was — a telecommunications company that, of course, had to modernise itself with all of the new I.T. technologies, but a company that remained a telco.
With the competition coming from those new digital giants (Google, Facebook, Amazon, among others), it needed to become leaner and meaner and that meant a very strong focus on costs. The new players all can deliver new digital telecommunications services at a fraction of the costs of the telcos and in order to survive, telcos around the world have to reduce their costs very significantly.
A successful strategy to make that happen within Telstra was established by Andy Penn and this cost transformation is still continuing. As the company’s CFO, Vicki Brady has been instrumental in this process and under her leadership, this process will no doubt continue. She already has five years’ experience within Telstra and before that, she also worked for Optus, which also speaks very highly of her. So she is very well up to date with the challenges and opportunities in the telecommunications industry.
A significant headache that she will also inherit is the increased monopolistic behaviour of the state wholesale provider NBN Co. The high wholesale costs that this dominant company can abstract from the market have led to ever-dwindling retail margins for companies such as Telstra.
The recent government handout of $480 million to NBN Co for regional services is a good example of this. This handout will further undermine the possibilities of the telcos to compete with NBN Co in regional and rural Australia. In this market, the telcos had positioned themselves to use their 4G and 5G networks to compete with NBN Co's poor quality fixed-wireless and satellite networks
With shrinking retail margins, the national telco competition will also continue to further heat up with Optus and TPG both facing the same problem. So, there is plenty of work to be done for Mrs Brady.
Of course, it is also important to mention the fact that Vicki Brady will be the first female CEO of the company and that she will receive the same salary and benefits as her male predecessor. Another quality for which she is well known is team building and that will also be very useful in an organisation that is still continuing to go through very turbulent times and knowing our industry it is hard to believe that this will ever change.
There are plenty of challenges for Mrs Brady but she is well equipped to face them and with an excellent team, it will be very interesting to follow her and her company in the years ahead of us.
My last words here will be a reflection on Andy Penn. I have personally found him a very accessible and helpful person, and I would like to thank him for that. He has taken Telstra's massive problems head-on and started the badly needed transformation of the company and, most importantly, he has been able to execute that transformation. This enables Telstra to be in a much stronger position going forward.
I also applaud the structural changes that he has set in motion, splitting the company into three divisions, each enabled to operate in its own market, at least to some extent, liberated from the vertically integrated company that didn’t allow for such levels of flexibility. This will not only change Telstra but also the total dynamics of the Australian telecommunications industry.
Paul Budde is an Independent Australia columnist and managing director of Paul Budde Consulting, an independent telecommunications research and consultancy organisation. You can follow Paul on Twitter @PaulBudde.
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