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Why Optus is in need of a new vision

If Australia's near $45 billion telecommunications market can be compared to an ocean, then its second-biggest company Singtel-Optus is an able swimmer currently treading water.

But a tsunami is coming; internet services like WhatsApp and Skype are providing once-lucrative services for free and the national broadband network will swamp the market with high-speed broadband by 2020, allowing rivals to sell near-identical products.

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So Optus is rapidly changing direction to avoid being sunk by the impact – a move that is likely to shake up the jobs, media and telecommunications markets.

Optus, on Tuesday strongly denied media reports that it's planning to axe 1000 jobs, or 10 per cent of its work force.

However, it did acknowledge a review was underway. Cuts are a strong possibility come April.

Why Optus has an identity crisis

When Optus was in its infancy simply being anyone but Telstra was good enough. Customers furious with the former government department's poor services finally had a place to go and they ran towards the alternative.

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But Telstra and the market adapted. Optus now has an identity crisis.

On network quality, customers perceive Optus to be worse than Telstra and better than Vodafone Hutchison Australia.

In price they think Optus has the edge on Telstra – but Vodafone Hutchison Australia is consistently launching new plans designed to be cheaper with more data download allowances.

Optus has had a bad run in customer service of late. But even if it did pump huge sums of money into improving its complaint levels, rivals like iiNet already have a better reputation.

And running beneath all of this is the rising threat of smaller players that have merged together with the scale required to take on the multinational carriers.

TPG Telecom's purchase of iiNet for $1.56 billion means it has more broadband customers than Optus. And Vocus Communications' merger with M2 Group gives it both corporate and consumer telecommunications divisions along with a $3.9 billion market capitalisation.

So if you're a phone or internet user looking for a provider, why would you buy Optus?

Optus needs a vision – a differentiator that will help it stand out in a market filled with large competitors who are boxing clever.

Making the elephant swim

None of this is new for Optus' chief executive Allen Lew, who made his mark at parent company Singtel by acknowledging the regional behemoth was an elephant that needed to dance.

"We wanted to make the elephant dance again," he told reporters in 2010. "If the elephant dances, the ants will have no choice but to leave the dance floor."

Optus is repositioning itself to be a home of entertainment and innovative services. This will mean more content deals and new apps being released in the Australian market – things that challenger brands like Dodo and TPG Telecom don't have the resources to match.

The job cuts are reportedly meant to help pay for all the new content Optus is buying in an effort to become a serious player in the media market, including the $189 million it spent to buy the exclusive broadcast rights to the English Premier League.

But the English Premier League is the tip of the iceberg – not enough Australians watch it to be game-changing. Optus is on the cusp of finalising a new deal with Pay TV provider Fetch that will likely give it more rights and better prices than before.

Customer service will be improved through automation, which will also inevitably lead to fewer jobs. On this point it isn't fair to single out Optus because Telstra and Vodafone Australia are running similar upgrade programs.

And research shows customers would prefer to fix their own problems online instead of spending 20 minutes waiting on the phone – small rivals like Amaysim are hitting new levels of service using low-cost services.

The other benefit of having technology-based customer service is the ability to scale and tailor it at a relatively low cost for new products and services. To use some jargon, it makes a company more 'nimble'.

iiNet proved that humans can be better at customers service than machines – people like talking to other people. However, the amount of effort required to provide that level of service is arguably unsustainable at Optus' scale.

Status quo

Optus could continue what it's doing and earn steady revenue for Singtel.

In fairness, Optus is improving its customer base at a solid clip after years of stagnation thanks to generous product offers - albeit with average revenues per user facing a squeeze.

But its share of the NBN market remains far too low when compared to its main competitors, Telstra and TPG Telecom.

Without change – fundamental, product shifting change – Optus will likely lose ground to smaller rivals like TPG and Vocus in the fixed-line market as well as Vodafone Australia in the mobile space.

Lew will need to make hard decisions that upset people, launch new apps that surprise and build entertainment bundles that offer things Telstra and Foxtel can't in order to succeed.

Lew made Singtel dance. Now it's time for Optus to sink or swim.

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