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Growth opportunities in Asia and beyond

Telstra News

Posted on October 2, 2014

4 min read

This opinion piece was originally published in the Australian Financial Review this morning.

Australian companies have had mixed success in building sustainable businesses in Asia, and many Australian companies choose to forgo potential opportunities in the region because of the risks and uncertainties associated with making such a move.

While the risks of expanding outside of Australia are real, depending on the opportunity they are neither insurmountable nor unquantifiable. Businesses should not be discouraged from investing time and effort into properly assessing the opportunities Asia provides.

Those that have achieved sustainable growth in the region acknowledge there are some common factors in their success.

First, an understanding that Asia is not an homogenous region. In Asia, one size does not fit all. From customers to customs, regulations to language, Asia is incredibly diverse and exciting. Attracting top talent with experience in your target market to manage how you enter and then operate in a specific country is critical.

Secondly, you need a clear understanding of your organisation’s strengths.

For Telstra’s part, we are looking to new growth opportunities where we can use our networks, technologies and capabilities to deliver software-based and managed enterprise solutions both here and in Asia. We already have one of the most extensive networks of international connectivity infrastructure throughout the region. Our opportunity is to support our enterprise customers as they pursue their own growth strategies in the region, leveraging this infrastructure through the provision of cloud, managed networks, managed security and complex telephony services such as video conferencing as a service.

It is also about knowing what value you bring to the table. Given many of the investment opportunities in Asia, particularly in highly regulated industries, are through partnerships, you need to understand how to blend your capabilities with those of others. Our joint venture with Telkom Indonesia to provide managed services to Indonesian companies, and companies operating in Indonesia, is a prime example of this.

Telstra’s preparation for growth into Asia has been controlled and systematic. We continue to assess the opportunities in our target markets and have strong leaders in place to build teams with local knowledge and experience.

To put the Asian opportunity into perspective, recent research conducted by the CSIRO forecast the Asian middle class would grow from 28 percent of the global total in 2009 to 66 percent by 2030. Similarly, OECD research forecasts Asia’s share of middle class consumption will grow more than 2.5 fold over the same period.

The research highlights an increase in discretionary spending by the emerging Asian middle class on personal and environmental health and a stronger demand for convenience.

When you combine these trends with the growing demand for high speed broadband and proliferation of smartphones and tablets throughout Asia, you start to get a sense for the opportunity for our services and e-industries – especially as connection to the internet in some parts of Asia remains relatively low. As Telstra approaches 90 percent population coverage with our market leading 4G mobile network (more than 4 times the coverage of the next nearest provider), 3G and 4G coverage in Asia remains very low.

As technology and connectivity make the world smaller, Telstra’s presence in Asia continues to grow. Telstra and Australia have much to offer the region, but much to learn as well, as we look for long term opportunities and partnerships.

As always patience is the key to success, with projects in the region often taking longer than one plans for – but with patience and tenacity, combined with the right success factors and making the most of new technologies, the rewards are commensurately higher. In 2008 we acquired a controlling interest in Autohome, which is China’s leading online destination for car buyers. Following a successful IPO of Autohome on the NYSE last year our 63.2 per cent stake, for which we invested $250m, is now valued at around $2.8 billion at today’s price – enormous growth by any assessment.

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