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SingTel’s Plans to Grow in Australia

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In Singapore’s telecommunications industry, SingTel (SGX: Z74) is ahead of its industry peers Starhub (SGX: CC3) and M1 (SGX: B2F) in terms of market share in key aspects of the business like mobile customer numbers.

In Australia, however, SingTel’s wholly-owned subsidiary Optus has to play second-fiddle to Telstra. Optus’ operations in Australia are an important part of SingTel’s business and accounted for almost one-third of the latter’s pre-tax profits in the last completed financial year. In fact, Optus has been picking up the slack for the gradual decline in SingTel’s Singapore-based operations.

Given such a back-drop, it’s important for SingTel’s investors to know how Optus intends to solidify its competitive position in the country and take on Telstra.

On that front, Optus has said that customer service and excessive fees will make or break the Australian telco market.

Kevin Russell, Optus’ chief executive, says the subsidiary is halfway through its three-year strategy of network and brand recovery but says it will start growing its customer base in early 2014.

Optus has seen a small drop in mobile customer numbers from 9.59m at the end of March this year to 9.49m at end September. But Russell has asked for investors’ patience as he believes Optus’ strategy will deliver in the coming years.

In The Australia Financial Review, Russell was quoted as saying “We have to strengthen our network; we’re halfway through that and I think we’ll be in a very strong place by February/March 2015… [Telstra’s] brand differentiation is network leadership while ours has got to be…how we have the best customer experience in the market place.”

Russell says Optus is not interested in beating Telstra in terms of sales or customer numbers but will make beneficial investments that will reap dividends for years to come. “If Telstra wants to continue to throw out large amounts of money for marginal gains, we won’t follow them there.”

That said, the subsidiary’s recent investment in the 700MHz spectrum, which has been occupied by analog television channels, will put Optus’ network on comparable terms with Telstra’s by 2015. “We have a clear view to where we’re going to be in three years,” said Russell.

For years, mobile providers in Australia have charged extremely high prices for little customer benefit. This has now changed. No longer will customers, who can pay hundreds of dollars per month on phone bills, put up with poor customer service and excessive charges.

Optus’ recent customer service and “My Plan” products have taken aim at excessive charges in order to differentiate themselves from closest rivals Vodafone and Telstra.

The initial signs of Optus’ dedication to improve customer service have been good. As part of Singtel’s latest quarterly earnings release, Russell said that “The initial signs for My Plan are positive. We saw a strong take-up of new plans and an upswing in data usage amongst early My Plan adopters.”

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. This article was written by Owen Raskiewicz and first published on fool.com.au. It has been edited for fool.sg.