The role of Marketing in Telstra International

Executive Summary

Telstra, originally Telecom Australia was established in 1901 by the Postmaster Generals Department to manage all domestic phone services. Telecom Australia continued to be operated by the Postmaster Generals Department until 1975 when it was created as a separate entity. In 1982 Telecom Australia became the official Telecommunications Corporation for all domestic and international telephone services. On the 1st of July 1995 Telecom Australia changed their name to Telstra for the purpose of differentiation from other global telecommunications companies. The company has been trading international since 1993. Currently Telstra operates in over 19 countries worldwide (Appendix One).

Telstra’s vision is to enhance its position as the leading full service telecommunications and information Service Company in Australia as well as to expand its presence internationally. Telstra recognises that Data and Internet services are the way of the future. Telstra is redefining the telecommunications industry and therefore are redefining their markets to offer a more extensive array of products to compete effectively in these markets.

Telstra has made many international investments in the Asia-Pacific region. As well as this, Telstra continues to review all investment opportunities, which will provide substantial strategic and financial placement in overseas markets.

1.0 Reasons for international expansion

1.2 Acquire Resources By forming an alliance with one of Asia’s larges wholesale telecommunications providers Reach Ltd (Refer to section 4.1) Telstra has acquired access to their worldwide network of submarine cables, I.P Systems as well as satellite systems.

1.3Diversification Currently there is a major loss occurring in the telecommunications sector across Australia (Appendix Two), however good times are predicted ahead. (Appendix Three) Telstra has recorded a record low of revenue as well as share price in the 3rd quarter of this financial year. By broadening their focus into different global markets, Telstra has been able to pick up the lost revenue in the Domestic market in the global market.

1.4 Minimise Competitive Risks Currently domestic markets are going through a period of rapid decline where as the global markets are going through a period of immense growth. Global consumers needs are becoming very similar on a domestic level, and therefore marketing strategies can be thought on a more global level.

1.5 Cushioning the economic Cycle As mentioned in section 1.3 there is a large drop in the telecommunications sector currently occurring across Australia. Since Telstra operates in over 19 countries worldwide (Appendix Four), the drop in the domestic market is having a smaller effect on the overall market.

2.0 Describe Market Research undertaken before International Expansion

• The structure of the telecommunications market in the Asia-Pacific Region.
• Consumer needs in regard to telecommunications in the Asia-Pacific.
• Possible competitors in the region if expansion was undertook.
• Success or otherwise of past expansion in the Asia-Pacific region as well as in other regions.
• Economic and business trends in the Asia-Pacific Region.

Research was undertaken by Telstra to show the potential of expansion in to the Asia Pacific region. The target market was assessed in accordance to their array of products and links were found in both the Australian and Asia-Pacific markets.

Looking at consumer trends in the region, who uses the products, how much they pay and what they expect from their telecommunications providers. The current telecommunications providers were assessed and analysed in accordance to what the consumer needs were in the current environment.

3.0 Identify Global Targets

3.1 Global Business Strategy Through a combination of strategic alliances and joint ventures Telstra offers voice, data and wireless services globally.

3.1.1 Objectives Telstra’s global objectives are mentioned in section 6.1 and 6.2.

3.1.2 Resources Telstra has recently acquired many resources globally. Resources acquired in the Asia-Pacific region are discussed in section 4.1. Other resources acquired include access to Xantics global satellite network . (Appendix Five)

3.1.3 Competitive Advantage By providing global sales and technical professionals globally, Telstra has managed to sustain a competitive advantage in the majority of countries of operation by properly servicing multinational customers. Telstra is also consistently redefining all markets of operation separately. This helps to keep new ranges of products as well as broaden the range and reduces costs of their products.

4.0 Method of international Expansion

4.1 Foreign Direct Investment On the 9th of February in 2001, Telstra International completed a set of strategic alliances in the Asia-Pacific region. The Strategic Alliance was with a Hong Kong Based company called Pacific Century CyberWorks Ltd (PCCW) (Appendix Six). This alliance comprises of:

• A 50:50 joint venture with Reach Ltd (REACH), which is one of the leading providers in Voice data and Internet connectivity in the Asia Pacific Region. (Appendix Seven)
• A 60% controlling interest in Regional Wireless Company Ltd (RWC), which operates of Hong Kongs leading telecommunications businesses CSL Ltd (CSL).

The strategic alliances were focused primarily in the Asia-Pacific region because at this current time, there is a large growth in this telecommunications in this regional area and there for provides the largest source of profit for the company.

Telstra also obtained a 35% equity interest in Xantic, a satellite company located in the Netherlands. Xantic’s company information is discussed in section 3.1.2 as well as in appendix five. Telstra also have a 50% share in Telstra Saturn Ltd located in New Zealand which is discussed in Appendix four.

5.0 Influences on the business set by the Global Market

5.1 Financial Influences

5.1.1 Currency Fluctuations Telstra has substantially expanded its business outside Australia and therefore has a range of international investments. Movements in the Australian dollar against other countries could affect operating revenues dramatically. To counter strike this, Telstra swaps foreign currency borrowings into Australian dollar equivalents. Occasionally there are exceptions however this method has proven to remove the foreign exchange risk.

5.1.2 Economic Developments Telstra is dependant on the general economic conditions in Australia, including levels of Gross Domestic Product (GDP), Interest Rates and Inflation. A significant determination in these conditions could adversely affect the business activities and the results of operations.

5.2 Political Influences

5.2.1 Restrictions on Foreign ownership The Australian government has two specific Acts set in place to protect Telstra from international take over, they are the Telstra Act and the Foreign Acquisition and Takeover act 1975.

5.2.1.1Telstra Act The Telstra Act states that an unacceptable foreign Ownership situation will exist if all foreign persons and associates hold in total a particular stake of more than 35%.

5.2.1.2 Foreign Acquisition and Takeover Act 1975 This Act applies to any acquisition of an interest in the shares of an Australian company with total assets of A$50 Million, which would result in, and foreign person controlling 15% or more.

5.3 Legal Influences

5.3.1 Hong Kong Telecommunications Regulation Unlike many other countries, Hong Kong is void of a general competition law. The Telecommunications Authority regulates anti competitive behaviour by issuing competition provisions in licences which states:

“…Shall not engage in any conduct which, in the opinion of the authorities has the purpose or effect of preventing or restricting competition in the operation of the service in any market…”

6.0 Establishing Marketing Objectives

6.1 Applications and Content Focuses on enhancing their capabilities to provide services more efficiently by developing new innovative products and then to further expand into these markets. This involves constantly redefining the market strategies and product line to ensure the best quality products at the best possible price.

6.2 International Expansion Focuses on increasing revenues and earnings from outside Australia, especially throughout the Asia-Pacific region. This includes strategic alliances and joint ventures already in progress as well as reviewing opportunity for new investments on a global scale.

7.0 How have Marketing Strategies been adapted to the Global Market

7.2 Standardisation Services such as online gaming are standardised in both Australia and the Asia Pacific Region. Telstra offers the “Wireplay” service in Australia and Hong Kong CSL offers the “Now” service in the Asia-Pacific region. These are both similar in price, quality and service.

7.3 Differentiation Services such as broadband supply vary between each country. Telstra supplies broadband to users in Australia at a fixed cost with no time limit but a download limit. However Hong Kong CSL offers broadband to users in the Asia-Pacific Region at a time-based cost with no limit in downloads.

8.0 How has global marketing contributed to the success of Global Operations

8.1 Financial

8.1.1 Obtaining Finance There are 2 ways that Telstra obtains its finance through the issue of shares as well as the sale of assets. In 1997, the government sold 33.3% of shares and then in 1999, the government sold a further 16.6% of Telstra shares. There are laws currently enforced by the government, which state that the Australian Government must be the majority shareholder. However, it is being claimed by both Telstra as well as the government cannot be the major shareholder as well as the major regulator at the same time. It is now looking very likely that we will se a further sale of Telstra within three years (Appendix Eight), which will prove to provide Telstra with a large amount of excess capital. On the 1st of February 2001 Telstra sold its global wholesale business to fund the majority of the joint venture between Telstra and REACH.

8.2 Marketing

8.2.1 Global Branding Telstra has no specific brand name, which is used, all over the world. The brands used vary from country to country. In New Zealand the brand used is Saturn Telecommunications. In Hong Kong the brand used is Hong Kong CSL and obviously in Australia the brand used is Telstra. Although there is no consistent global brand recognisable throughout the world, in the markets in which the various subsidiaries operate the brand names which they use are very well known, trusted and respected.

8.2.2 Standardisation/Differentiation Refer to section 7.2 and 7.3

8.3 Employment Relations

8.3.1 Organisational Structure Telstra as an entity uses the International Area structure. Telstra is divided into 4 strategic business units, Domestic Retail which comprises of Telstra Retail, Telstra OnAir and Telstra Country Wide, Telstra Wholesale, Telstra International and Infrastructure Services. Telstra International is the head of all International operations in the Telstra Corporation.

8.3.2 Staffing Telstra takes a Decentralised approach to staffing in all countries of operation. Managers in each region are in charge of making decisions regarding their various subsidiaries, which they control. This allows the managers to get to know the markets, which they control. Therefore the managers are able to make the appropriate decisions in the market.

8.4 Operations

8.4.1 Sourcing Telstra sources Satellites, Submarine Cables and I.P. Systems from REACH. This was a more financially viable option to creating their own network as well as being a more practical and cost effective way to obtain the resources.

Bibliography

• Telstra Annual Report 2001
• Telstra Half Yearly Progress Report 2002

Internet Sites

• Whirlpool – The Australian Broadband user Community http://www.whirlpool.net.au
• Australian Department of Foreign Affairs and Trade http://www.dfat.gov.au/
• Pacific Century Cyber Works http://www.pccw.com
• Telstra Australia http://www.telstra.com.au
• Telstra Clear New Zealand http://www.teltraclear.co.nz
• Reach Ltd http://www.reach.com
• Xantic http://www.xantic.com

Newspaper Articles The Australian Financial Review

• “Telstra hit as Revenue Sink” 05/03/02
• “Testing the mood of the market” 29/05/02
• “Telstra rebate pressures rivals” 28/05/02
• “Telstra sale is back on the Agenda” 02/05/02

The Sydney Morning Herald

• “Ziggy keen to generate more of Telstra’s income in Asian region” 09/05/02

The Australian

• “Telstra Sale: Coalition Near a Deal” 28/05/02
• “Telstra sees good times ahead” Date Unknown

Magazine Articles The Bulletin

• “Ziggy’s Chinese Burn” July 24th 2001

Business Review Weekly

• “Telstra tries to grow up in a world of Internet Giants” January 21st 2000
• “Bean me up, Ziggy” August 6th 1999
• “Ziggy’s Mission” March 8th 1999