Did this MobCon strategy deliver a welcome return on investment to Hutchison Telecoms’ long term shareholders ?
The share market’s initial enthusiasm for 3′s MobCon strategy rapidly evaporated once Telstra entered the 3G market.
H3GA's share price dropped considerably after Telstra entered the 3G market
This the story of how Telstra employed a very different approach to leveraging the MobCon to consolidate its position as market leader.
When Telstra made its move into the 3G market it had given 3 Mobile a three year head start.
How long would it take the market leader to assume dominance in the 3G space? As it turned out it was a matter of months rather than years.
In 2006 Telstra was already a Media Comms company. It had invested heavily during the 1990′s in Pay TV (Foxtel) and the internet. Building its own premium web portal (Bigpond) and investing in a number of key media properties (e.g Multiple Football codes and Motor Sport)
Telstra was already pursuing a successful Media Comms model when it invested in 3G
When 3 Mobile launched its 3G network it had invested heavily in their Plant 3 Portal to attract subscribers. Telstra did not need to invest in a new premium mobile content portal. It simply repurposed the existing online and Pay TV properties and redistributed them on the 3G network.
The reality is though when Telstra entered the 3G market content was not really a big part of their strategy. The strategic focus was a AuD$1.1 billion investment in a national high-speed wireless broadband network.
The key differentiator between the two strategies was one of the basic rules of the MobCon:
Content may be King in media circles but for Telcos and I.T. she’s a mistress who is free with her favours.
While 3 Mobile focused on professional content Telstra focused on opening up the 3G network to the internet so subscribers could find the content they wanted without Telstra having to invest in the development of content.
They offered Australian Mobile Phone subscribers access to the Mobile Web.
As Australia’s largest ISP their strategy benefited from past experience.
Experience told them that if the name of the game is bandwidth then you’ll sell more bandwidth giving your customers access to the rest of the world than you will limiting them to what’s on offer in your pay per view “Walled Garden”.
Breakdown of Telstra's Mobile Revenues (2008)
2 Years on Telstra’s strategy had won the day. As you can see from the chart above: Wireless broadband delivered 4.5 times (i.e. WBB + email) the revenues of premium content. Indeed wireless broadband matched the revenues of SMS.
3 Mobile quickly got the message and in 2008 introduced wireless broadband into its product mix. But it was too little too late.
3′s ARPU had peaked back in 2004. By 2008 it was Telstra who was setting the industry benchmark in subscribers and ARPU.
3 Mobile vs Telstra ARPU
3 Mobile’s three year advantage in the 3G “Green fields” evaporated within 18 months of Telstra entering into the market. Today Telstra has doubled its advantage to 4.4 million 3G subscribers with 588,000 subscribers to Wireless Broadband.
Telstra expects to have between 60 and 70 per cent of the 3G by 2010. Among post-paid consumer (non-business) subscribers, the proportion on 3G was already 60 per cent.
As the CEO of Telstra Sol Trujillo said at the time:
“We made a billion dollar bet with the confidence of a poker player holding three aces – market based management to know what our customers want, great technology with a roadmap to the future and high-performing partners. By the mix of deploying HSPA, faster speeds, and targeted applications, we have changed the working habits and lifestyles of Australians and grown revenues, subscribers and ARPU.”
Where did this leave H3GA and its ability to improve shareholder value moving forward?
Back in 2003 H3GA had made a $3 Billion bet to become the market leader in the “green fields” of 3G mobile communications. Almost 7 years on it now looks like Telstra has taken the table.
In response H3GA and Vodafone formed a joint venture earlier this year. It will be interesting to see what happens next…
* Note: Hutchison Whampoa Limited owns 52% of Hutchison Telecommunications (Australia) Limited (“HTAL”), which owned Hutchison 3G Australia Pty Limited (“H3GA”) (which runs the “3″ network)
Posted on October 29, 2009
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