The Development of Telstra
The Australian telecommunication market is currently shared between three main players with the key player being Telstra, an Australian premier telecommunication company with perhaps one of the richest history in light of telecommunications companies in the world. Even though there is a paucity of information touching on the development of the Telstra, and its history, it is indubitable that there are several factors that the role played in formation of the company; factors that if complied proficiently, gives a clear picture of the history of the Telstra. This papers aims at compiling information about the development of Telstra.
Background of Telstra
As indicated in the Telstra website, the history of Telstra can be traced back to 1901 when the Post Masters General department was created in Australia following the handing of powers to the commonwealth Government in handling Posts and Telegraphs by the constitution in a move that ended up creating a monopoly with regards to telecommunication. Initially, handling of posts and telegraphs was the responsibility of separate and distinctive colonial departments. The year 1946 saw that enactment of the Overseas Telecommunications Act of 1946 that sought to establish, maintain and develop public telecommunication services between Australia and other countries, its external territories and ships in the sea (Australian Bureau of Statistics, 1984). As a provision in the Act, The Overseas Telecommunications Commission of Australia (OTC) was to be formed to serve as a custodian of the Overseas Telecommunications Act. The OTC was given special instructions by the Commonwealth Government to ensure its services were as cheap as possible. In 1975, the Telecommunications Act of 1975 was signed into law leading to the separation of Telecommunications from postal functions (Telstra, 2012; Grant, 2004). The law created the Australian Telecommunications Commission, trading internationally and locally as Telecom. As Grant (2004) asserts the separation of telecommunication and postal functions by the Australian Telecommunication Act also lead to the creation of Australian Postal Commission (Australia Post) that was supposed to handle postal duties. Anecdotally, during this time, the availability of telephone in Australia was one telephone to ten people.
Telecom was incorporated into public companies in 1989 as a result of the amendment of the Australian Telecommunications Corporation Act in 1989 (which renamed it to Australian Telecommunication Corporations) (Campbell, 2008) even though it continued to trade are telecom in Australia (Telstra, 2012). In 1991 telecom was incorporated into a limited liability company even though it retained the name “Telecom”. The following year (1992) saw the merging of OTC and Telecom into a single company called the Australian and Overseas Telecommunication Corporation (AOTC) even though it still carried out its businesses as Telecom. Telecom was later renamed Telstra in 1993; a name that was only used for international business deals even though locally it was still using telecom (Telstra, 2012). In 1995, the name telecom was dropped by Telstra hence the name Telstra could now be used both in international business and local business.
Development in Product and Service within Australia
As noted earlier, Telecom was formed following the enactment of the Telecommunications Act of 1975 with specific functions that ranged from installation, maintenance and operation of telecommunications infrastructure besides being the sole issuer rights to third parties wanting to install any infrastructure that was directly linked to domestic telecommunication as was stipulated by the Act. (Grant, 2004; Telstra, 2012). Notably, the products and service principally provided by the company during that time was domestic telephony, which was essentially cable based. However, with time the company grew to assume the role of providing international telephony services to Australia especially follwing the merger of OTC (Overseas Telecommunication Commission) with Telecom in 1992. This gives insight to the fact that the company started iffering intentional services in the year 1992.
Currently the company has a wide range of products and services and continues to launch new ones by the day. For instance, the company launched its GSM telephony network in 1993 on the 900 MHz band but has since been upgraded to several other stronger bands like the 1800MHz band and 2100MHz band. This is in comparison with its first digital telephony service operating at 500MHz that was launched in 1981 (Telstra, 2012). On the same note, in the 1990s the most common broadband networks offered by Telstra were 2G based. Reportedly the company is in the process of rolling-out a 4G mobile network famously referred to as LTE (Long Term Evolution) mobile broadband that is aimed at ensuring that Australian enjoy a download speed of up to 40Mbps- the 3G mobile broadband network which still the Australia’s extensive mobile broadband has a maximum download speed of 10Mbps (Telstra, 2012).
Telstra’s International Expansion
Formed specifically to deliver its services in Australia, Telecom would soon become Australia’s premier company that strived to connect Australia to the outside world. Telstra’s international expansion endeavor can be traced back to 1992 when Telstra introduced its services in Europe leading to the launch of Telstra Europe. The company has since expanded to several other countries, and regions inclusive of Hong Kong following the acquisition of CSL, China as a result of the acquisition of SouFun and Hawaii, among others. It is worth noting that the successful international expansion of Telstra has been capacitated by the launch of Telstra International (currently Telstra Global).
Development in Operations (Segmentation)
Telstra Privatization and Financial Performance
The Telecommunications Act of 1989 sought to create a competitive environment in the Australian telecommunication sector. This implies that the Telecom (now Telstra) lost the privileges that come with monopoly hence had to strive to remain competitive. In a bid to remain competitive, Telstra was partially privatized in 1997 where Commonwealth Government sold about 33% of the shares (Telstra, 2012: Desai, 2006). Ideally, the privatization was aimed at improving Telstra’s service delivery to customer and also raises more capital. Goldfinch and Wallis (2009, p. 184) on their part contend that the privatization of Telstra “was important, but it was in the policy social domain that radical reforms had to occur.” Two years later, the Telstra was listed for another global offering which saw the commonwealth sell another 16% of its shares, and the shares sold listed in the Australian Stock Exchange, New York Stock Exchange and New Zealand Stock Exchange (Telstra, 2012: Desai, 2006). The third and fourth partial privatization of Telstra took place in 2006 and 2007 respectively. In the third partial privatization, the commonwealth sold away 31% of its share while, in the fourth partial privatization, it transferred its residual shares to Future Fund.
It also of interest to note that the company’s sales revenue, profit, free cash flow and returns on assets have been on a upward trend for several years. As highlighted in the company’s website, the company has witnessed the growth of its sales revenue for five years running since 2008. For instances, in 2009, the sales revenue was $25.3 billion up from $24.6 billion in 2008 even though there was a slight drop in 2010 in which the company recorded a Sales revenue of $24.8 billion. Afterwards, the Sales revenue grew to $24.98 billion in 2011, and further growth is expected in 2012. Apparently, the company’s net debt has decreased tremendously from $15.3 billion to $13.2 billion between 2008 and 2012. The financial summary of Telstra for five years (2008-2012) is presented by the table below.
Source: Telstra Company Limited Website, 2012.
Even though competition in the telecommunication sector in Australia has become stiff with the entrance of international companies like Vodafone into the Australian voice and data market, Telstra is still Australia’s the main telecommunication company commanding a considerable share of the telecommunication market. The company is commanding a remarkable 42% of the telecommunications market share in Australia followed by Optus and VHA with 31% and 27% respectively (ACMA, 2011). Telstra has since diversified its products and services and is no longer just offering “telegraph and telephony services”. The company currently offers a wide range of products that include; fixed and mobile services, mobile networks, wholesale and paid television among other services. Some media companies in Australia report that the company was recently rebranded in what is termed as the greatest change ever since Telecom was renamed Telstra (Sandev, 2011).
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Campbell, D. ed. 2008. International Telecommunications Law . Salzburg: Yorkhill Law Publishers.
Desai, A. V. 2006. India's telecommunications industry: history, analysis, diagnosis. New Delhi, Sage Publ.
Goldfinch, S., and Wallis, J. 2009. International handbook of public management reform. Cheltenham, Edward Elgar.
Grant, A. ed. 2004. Australian telecommunications regulation: the Communications Law Centre guide. Sydney: University of N.S.W. Press.
Sandev, M. (2011, September 19). Telstra's Colorful Rebrand Craves Emotional Connection. Bandt. Retrieved from http://www.bandt.com.au/news/top-stories/telstra-s-colourful-rebrand-craves-emotional-conne
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Telstra. 2012. About Telstra - History of Telstra. Telstra. Retrieved October 9, 2012, from http://www.telstra.com.au/abouttelstra/company-overview/history/telstra-story/index.htm