1 00:00:05,850 --> 00:00:08,190 Sean Aylmer: Welcome to the Fear and Greed Business Interview. I'm Sean 2 00:00:08,190 --> 00:00:11,580 Sean Aylmer: Aylmer. Optus is getting a new CEO. Stephen Rue has 3 00:00:11,580 --> 00:00:14,279 Sean Aylmer: resigned from running NBN Co to take up the chief 4 00:00:14,280 --> 00:00:16,949 Sean Aylmer: executive role at Optus later this year. It's a big 5 00:00:16,949 --> 00:00:19,350 Sean Aylmer: job, and not just growing Australia's number two telco, but 6 00:00:19,350 --> 00:00:22,049 Sean Aylmer: repairing the damage done by last year's major outage and 7 00:00:22,050 --> 00:00:25,530 Sean Aylmer: the cyber attack the previous year, that saw data relating 8 00:00:25,530 --> 00:00:28,499 Sean Aylmer: to more than two million customers stolen. But it's not 9 00:00:28,500 --> 00:00:31,410 Sean Aylmer: the only news in the telco industry. Last week, Optus 10 00:00:31,410 --> 00:00:34,409 Sean Aylmer: and TPG did a tower sharing deal worth around $ 1. 11 00:00:34,650 --> 00:00:37,350 Sean Aylmer: 6 billion in a bid to take on Telstra in 12 00:00:37,350 --> 00:00:41,940 Sean Aylmer: regional coverage. Meanwhile, shares in Telstra, Australia's most widely held 13 00:00:41,940 --> 00:00:46,019 Sean Aylmer: stock, have been heading backwards, down about 12% over the past 14 00:00:46,019 --> 00:00:49,049 Sean Aylmer: month or so. It also announced yesterday that it was 15 00:00:49,049 --> 00:00:52,769 Sean Aylmer: delaying the closure of the 3G network. Over at NBN 16 00:00:52,769 --> 00:00:55,860 Sean Aylmer: Co, wholesale prices are rising, with costs flowing on to 17 00:00:55,860 --> 00:00:59,430 Sean Aylmer: businesses across the country. Plenty happening in telcos right now, 18 00:00:59,430 --> 00:01:02,250 Sean Aylmer: and when that's happening, we go to one person. Paul 19 00:01:02,250 --> 00:01:06,750 Sean Aylmer: Budde is a telecommunications management and business consultant, and through 20 00:01:06,750 --> 00:01:11,429 Sean Aylmer: his business, Paul Budde Consultancy, has advised more than 100 investment 21 00:01:11,459 --> 00:01:14,280 Sean Aylmer: companies on transactions. He's also worked with governments around the 22 00:01:14,280 --> 00:01:19,289 Sean Aylmer: world on telecommunications things, particularly relating to national broadband networks. 23 00:01:19,290 --> 00:01:20,940 Sean Aylmer: Paul, welcome back to Fear and Greed. 24 00:01:21,480 --> 00:01:22,350 Paul Budde: Thank you, Sean. 25 00:01:22,950 --> 00:01:25,139 Sean Aylmer: So much going on in the industry. Let's start with 26 00:01:25,139 --> 00:01:29,369 Sean Aylmer: Stephen Rue, the current NBN boss joining Optus in November 27 00:01:29,369 --> 00:01:32,069 Sean Aylmer: this year. What sort of job has he got in 28 00:01:32,069 --> 00:01:33,810 Sean Aylmer: front of him? He's probably got a lot of work, 29 00:01:34,319 --> 00:01:36,690 Sean Aylmer: from infrastructures through to public relations. 30 00:01:38,039 --> 00:01:42,599 Paul Budde: Yeah. I'd say that that, indeed, an interesting move. Actually, 31 00:01:42,599 --> 00:01:47,039 Paul Budde: quite unexpected. It's also quite unusual that, at such a 32 00:01:47,039 --> 00:01:52,140 Paul Budde: level in the telecoms industry, CEOs just cross over from 33 00:01:52,140 --> 00:01:55,710 Paul Budde: one job to another job. Yeah, a bit of raised 34 00:01:55,710 --> 00:02:00,660 Paul Budde: eyebrows because there are competition issues, there are confidential issues, 35 00:02:00,660 --> 00:02:03,270 Paul Budde: et cetera, that all need to be taken into account. 36 00:02:03,929 --> 00:02:08,459 Paul Budde: But nevertheless, it's going to happen. I think that, from Optus' 37 00:02:08,460 --> 00:02:12,630 Paul Budde: point of view, you now get the CEO which has 38 00:02:12,630 --> 00:02:19,020 Paul Budde: been incredibly well able to navigate through the political nightmare 39 00:02:19,020 --> 00:02:25,109 Paul Budde: of the NBN, where you've got basically two opposing bosses on 40 00:02:25,680 --> 00:02:28,620 Paul Budde: the Liberal side and the Labor side, who think differently 41 00:02:28,620 --> 00:02:35,220 Paul Budde: about the NBN. Particularly the Liberal government was not very happy 42 00:02:35,700 --> 00:02:40,260 Paul Budde: with the NBN in the first place. That was a 43 00:02:40,260 --> 00:02:43,919 Paul Budde: lot of issues that Rue had to work around and 44 00:02:43,919 --> 00:02:47,340 Paul Budde: he did that remarkably well. Not that everybody was happy 45 00:02:47,340 --> 00:02:50,160 Paul Budde: with it, but was able to do that. He brings 46 00:02:50,160 --> 00:02:56,219 Paul Budde: a lot of political, regulatory insights, knowledge, experience with him 47 00:02:56,219 --> 00:02:59,788 Paul Budde: into Optus and Optus clearly is in need of that 48 00:02:59,788 --> 00:03:00,449 Paul Budde: after the wake of last year. 49 00:03:02,730 --> 00:03:05,760 Sean Aylmer: Okay. What is his number one priority, or maybe his 50 00:03:05,760 --> 00:03:07,920 Sean Aylmer: one, two and three priorities once he joins Optus? 51 00:03:07,920 --> 00:03:13,678 Paul Budde: Yeah. I think there are quite a lot of issues at Optus. Optus 52 00:03:13,679 --> 00:03:18,059 Paul Budde: is rather stagnant so it's not really growing. There have 53 00:03:18,059 --> 00:03:23,310 Paul Budde: been consistently issues about Singtel, the boss of Optus, selling 54 00:03:23,310 --> 00:03:27,419 Paul Budde: the company. There has been too many rumors for too 55 00:03:27,419 --> 00:03:29,850 Paul Budde: long periods of time to say, " Ah, this is all 56 00:03:30,270 --> 00:03:34,980 Paul Budde: not true." There is definitely that issue. If you want 57 00:03:35,309 --> 00:03:38,520 Paul Budde: to sell the company, then obviously you want to have 58 00:03:38,520 --> 00:03:43,020 Paul Budde: it at its best in relation to profitability, cost management 59 00:03:43,440 --> 00:03:48,210 Paul Budde: and things like that. That will be definitely an number 60 00:03:48,210 --> 00:03:51,900 Paul Budde: one issue. The other issues, of course, are in relation 61 00:03:51,900 --> 00:03:55,800 Paul Budde: to the fact that Optus has lost some credibility. It 62 00:03:55,800 --> 00:04:00,060 Paul Budde: hasn't had a lot of direct damage in customers that 63 00:04:00,420 --> 00:04:05,670 Paul Budde: have gone away, but nevertheless, the shine definitely is off Optus 64 00:04:06,059 --> 00:04:09,840 Paul Budde: and it has to be very careful in going forward. 65 00:04:10,410 --> 00:04:14,610 Paul Budde: New customers coming on board might think twice if they 66 00:04:14,610 --> 00:04:19,020 Paul Budde: want to join Optus. That are all issues that are 67 00:04:19,020 --> 00:04:23,219 Paul Budde: in the background, as a result the poor situation over 68 00:04:23,219 --> 00:04:27,719 Paul Budde: the last 12 months. The third major point is, of 69 00:04:27,719 --> 00:04:31,620 Paul Budde: course, it's relationship with the government and the regulator. They 70 00:04:31,620 --> 00:04:34,680 Paul Budde: are definitely not happy with Optus. There have been some 71 00:04:34,680 --> 00:04:40,469 Paul Budde: serious mistakes, serious issues, embarrassed the government and they're not the 72 00:04:40,469 --> 00:04:43,230 Paul Budde: right things to do. He will have to do a 73 00:04:43,230 --> 00:04:46,079 Paul Budde: lot of repair work. He has a good rapport with 74 00:04:46,080 --> 00:04:49,710 Paul Budde: the Minister, so that is definitely a good thing as well. 75 00:04:50,250 --> 00:04:52,799 Paul Budde: That are the three key issues I see that Rue 76 00:04:52,800 --> 00:04:56,160 Paul Budde: will have to work on, basically straight away. 77 00:04:56,550 --> 00:04:58,529 Sean Aylmer: Okay. Staying with Optus, I want to talk about the 78 00:04:58,529 --> 00:05:01,770 Sean Aylmer: deal, that tower sharing deal with TPG, between the two 79 00:05:01,770 --> 00:05:05,129 Sean Aylmer: of them, announced last week. Now previously, the ACCC had 80 00:05:05,129 --> 00:05:08,219 Sean Aylmer: blocked a deal between Telstra and TPG because of the concerns 81 00:05:08,220 --> 00:05:13,110 Sean Aylmer: over competition and Telstra's market domination. Now there's the tower 82 00:05:13,110 --> 00:05:16,830 Sean Aylmer: sharing deal between Optus and TPG. I suppose, how do 83 00:05:16,830 --> 00:05:20,549 Sean Aylmer: these deal actually work? What's it mean for consumers, at 84 00:05:20,549 --> 00:05:21,180 Sean Aylmer: the end of the day? 85 00:05:22,350 --> 00:05:26,640 Paul Budde: Yeah. In both situations, the initiative of Telstra, and now 86 00:05:26,670 --> 00:05:30,300 Paul Budde: the initiative of Optus, are basically good for people in 87 00:05:30,390 --> 00:05:34,230 Paul Budde: rural and regional areas. For the last 20 years, I've 88 00:05:34,230 --> 00:05:40,230 Paul Budde: consistently asked for roaming situations, whereby in (inaudible) metropolitan 89 00:05:40,230 --> 00:05:44,670 Paul Budde: areas, it's highly unlikely that you can make huge profits 90 00:05:45,029 --> 00:05:50,040 Paul Budde: by duplicating, or even have three mobile networks competing with 91 00:05:50,040 --> 00:05:52,710 Paul Budde: each other in a market that's too thin for that. 92 00:05:52,710 --> 00:05:58,139 Paul Budde: I have been an advocate of sharing infrastructure in regional 93 00:05:58,139 --> 00:06:01,740 Paul Budde: or remote areas, and then all three operators can utilize 94 00:06:01,740 --> 00:06:05,100 Paul Budde: that network. A similar thing as we operate the NBN. 95 00:06:05,310 --> 00:06:05,430 Sean Aylmer: Yeah. 96 00:06:05,430 --> 00:06:10,320 Paul Budde: The NBN is a wholesale network, and others, some 20 or 30 companies or even 97 00:06:10,320 --> 00:06:13,529 Paul Budde: more, are actually operating on top of that network. That 98 00:06:13,529 --> 00:06:16,949 Paul Budde: would be the same with the mobile network, if you would allow for roaming. 99 00:06:17,430 --> 00:06:20,490 Paul Budde: Now this deal between Telstra and TP in the first place, 100 00:06:20,490 --> 00:06:27,448 Paul Budde: and Optus with TPG now, are mot necessarily totally roaming, but 101 00:06:27,450 --> 00:06:32,190 Paul Budde: it definitely it utilizing existing infrastructure to reach more customers. In 102 00:06:32,910 --> 00:06:36,209 Paul Budde: that respect, it's really good for people in regional or 103 00:06:36,270 --> 00:06:40,890 Paul Budde: remote areas. They now have more choice. In the situation where 104 00:06:40,890 --> 00:06:43,710 Paul Budde: there was only Telstra, perhaps they now have a competitor. 105 00:06:44,099 --> 00:06:47,970 Paul Budde: In situations where they didn't have any signal at all, 106 00:06:48,270 --> 00:06:51,419 Paul Budde: there's now more of a chance that they do get 107 00:06:51,420 --> 00:06:55,378 Paul Budde: a signal. In that respect, this deal is good. The 108 00:06:55,380 --> 00:06:58,050 Paul Budde: reason why Telstra fell through was of course for competition 109 00:06:58,050 --> 00:07:01,500 Paul Budde: issues. Telstra is already a very large and big company, 110 00:07:01,500 --> 00:07:04,440 Paul Budde: it would become even more dominant and harder to compete 111 00:07:04,440 --> 00:07:09,089 Paul Budde: with. The Optus TPG is of course different, so that's the 112 00:07:09,089 --> 00:07:13,439 Paul Budde: runner up, the competitor. I can't see that the ACCC will 113 00:07:13,440 --> 00:07:17,850 Paul Budde: have much problems with allowing these two companies to work 114 00:07:17,850 --> 00:07:18,270 Paul Budde: together. 115 00:07:19,020 --> 00:07:20,790 Sean Aylmer: Stay with me, Paul. We'll be back in a minute. 116 00:07:28,619 --> 00:07:33,210 Sean Aylmer: I'm speaking to Paul Budde, telco expert and investment advisor through 117 00:07:33,210 --> 00:07:38,670 Sean Aylmer: Paul Budde Consultancy. Okay, so you mentioned Telstra. A couple 118 00:07:38,670 --> 00:07:40,139 Sean Aylmer: of things on Telstra I want to ask you about. The 119 00:07:40,440 --> 00:07:44,190 Sean Aylmer: 3G network, which they were due to close in June, 120 00:07:44,190 --> 00:07:46,770 Sean Aylmer: they've delayed that until August. I think they're worried about 121 00:07:46,859 --> 00:07:50,940 Sean Aylmer: emergency phone calls. Just explain that. But also I want 122 00:07:50,940 --> 00:07:54,840 Sean Aylmer: to ask you, Telstra just has been an under performer recently, obviously 123 00:07:54,840 --> 00:07:57,359 Sean Aylmer: lots of people own Telstra shares, I'm wondering why. But 124 00:07:57,360 --> 00:08:00,359 Sean Aylmer: certainly with the 3G network, what's happening there? 125 00:08:01,080 --> 00:08:05,069 Paul Budde: Yeah. Over the years, we've seen moving from what was 126 00:08:05,070 --> 00:08:10,980 Paul Budde: simply called mobile to 2G, and then 3G, 4G, 5G. These are all network upgrades 127 00:08:10,980 --> 00:08:13,200 Paul Budde: and these are necessary because we are more and more 128 00:08:13,200 --> 00:08:15,150 Paul Budde: using the network, and there will be more and more 129 00:08:15,150 --> 00:08:18,540 Paul Budde: mobile people on the network, and everybody's nowadays using it 130 00:08:18,540 --> 00:08:22,109 Paul Budde: for data. 99% on the mobile network is data, only 131 00:08:22,109 --> 00:08:26,610 Paul Budde: 1% voice. Then if you talk about data, you talk 132 00:08:26,610 --> 00:08:29,160 Paul Budde: about video, you talk about games, you talk about all 133 00:08:29,160 --> 00:08:33,599 Paul Budde: sorts of things that requires a lot of capacity. All 134 00:08:33,599 --> 00:08:38,729 Paul Budde: these three, four, five technologies use radio spectrum. Radio spectrum 135 00:08:38,790 --> 00:08:43,740 Paul Budde: has a finite situation. There's not plenty of it, like glass. 136 00:08:44,130 --> 00:08:46,380 Paul Budde: Fiber, you can go forever, and you can have two, 137 00:08:46,380 --> 00:08:49,679 Paul Budde: three, four, five cables. That's not the situation with spectrum. 138 00:08:50,190 --> 00:08:53,489 Paul Budde: There is also the aviation, there is the fire brigades, 139 00:08:54,300 --> 00:08:58,559 Paul Budde: the police. Everybody's using the radio spectrum. There's a limited 140 00:08:58,559 --> 00:09:02,370 Paul Budde: amount that's available for mobile, and therefore what they want 141 00:09:02,370 --> 00:09:05,550 Paul Budde: to do, if you go to 5G, or 4G, or whatever, then 142 00:09:05,550 --> 00:09:09,030 Paul Budde: you start reusing your old spectrum for the new system. 143 00:09:09,719 --> 00:09:13,230 Paul Budde: Therefore, you can't just continuously to use the 3G system 144 00:09:13,410 --> 00:09:17,639 Paul Budde: technology anymore because the spectrum that's used by 3G will 145 00:09:17,639 --> 00:09:21,870 Paul Budde: now be used by 4G and 5G. That's the reason why it's 146 00:09:21,870 --> 00:09:28,139 Paul Budde: necessary. Now some phones, 400,000 of them out of the 30 or 35 147 00:09:28,139 --> 00:09:32,520 Paul Budde: million phones that there are in this country, less than 148 00:09:32,520 --> 00:09:38,250 Paul Budde: 400,000 of them are still utilizing the 3G technology, or 149 00:09:38,550 --> 00:09:42,900 Paul Budde: within 4G, an older version of 4G. That means that 150 00:09:43,230 --> 00:09:48,629 Paul Budde: those phones won't work anymore after the shutdown of the 3G 151 00:09:48,630 --> 00:09:52,139 Paul Budde: network. Now many of these phones are basically not in 152 00:09:52,139 --> 00:09:55,440 Paul Budde: use, or are a second or third phone that people 153 00:09:55,440 --> 00:09:58,530 Paul Budde: are using, so lots of them are not really active 154 00:09:58,530 --> 00:10:01,559 Paul Budde: in that respect, but nevertheless, there will be tens of 155 00:10:01,559 --> 00:10:04,828 Paul Budde: thousands of phones that are active and these phones need 156 00:10:04,830 --> 00:10:06,630 Paul Budde: to be replaced by new ones if you want to 157 00:10:06,630 --> 00:10:10,679 Paul Budde: continue with your mobile service. That's a bit of the 158 00:10:10,679 --> 00:10:14,940 Paul Budde: issue that, again, it became political. It becomes political, the 159 00:10:14,940 --> 00:10:18,120 Paul Budde: Minister has to step in and everybody complains, " Oh my 160 00:10:18,120 --> 00:10:22,410 Paul Budde: God, we can't do this," so it becomes political. Telstra 161 00:10:22,410 --> 00:10:25,259 Paul Budde: and Optus have to do a better job in informing 162 00:10:25,259 --> 00:10:29,789 Paul Budde: the last 300, 400 phones that are there. What's next is 163 00:10:29,789 --> 00:10:33,060 Paul Budde: happening is that Telstra is sending a particular message to 164 00:10:33,090 --> 00:10:35,189 Paul Budde: everybody who still has an old phone that makes a 165 00:10:35,190 --> 00:10:38,670 Paul Budde: mobile call to indicate that that phone can't be used 166 00:10:38,670 --> 00:10:42,059 Paul Budde: anymore after August. Now, that's what is happening at the 167 00:10:42,059 --> 00:10:46,350 Paul Budde: moment. Hopefully most people that are still using those phones 168 00:10:46,650 --> 00:10:50,880 Paul Budde: are then prompted to do so, or just to make the decision that 169 00:10:50,880 --> 00:10:54,449 Paul Budde: they don't want to do that. Quite obviously, they might 170 00:10:54,450 --> 00:10:56,639 Paul Budde: be in a situation that they don't need to upgrade the 171 00:10:56,639 --> 00:10:59,458 Paul Budde: phone because they already have another phone. As I mentioned, 172 00:10:59,460 --> 00:11:01,139 Paul Budde: it might be the second or third phone. 173 00:11:01,830 --> 00:11:03,899 Sean Aylmer: Okay. Paul, we're totally out of time, but just very 174 00:11:03,900 --> 00:11:06,810 Sean Aylmer: quickly, Telstra share price has been going the wrong way, 175 00:11:06,960 --> 00:11:09,569 Sean Aylmer: for Telstra shareholders at least, over the past month or 176 00:11:09,570 --> 00:11:11,550 Sean Aylmer: so. Is there anything much in that, from where you 177 00:11:11,550 --> 00:11:12,000 Sean Aylmer: stand? 178 00:11:14,010 --> 00:11:17,849 Paul Budde: It's a global situation, Sean, because what is happening is 179 00:11:17,849 --> 00:11:21,299 Paul Budde: that telecommunications companies are further and further pulled back into 180 00:11:21,299 --> 00:11:22,920 Paul Budde: a utility sort of environment. 181 00:11:23,129 --> 00:11:23,369 Sean Aylmer: Yeah. 182 00:11:23,879 --> 00:11:26,880 Paul Budde: It's very, very difficult for them to come up with 183 00:11:26,880 --> 00:11:31,348 Paul Budde: all sorts of new services that create new revenues. Again, 184 00:11:31,350 --> 00:11:34,110 Paul Budde: there was the big hype around 5G, all sorts of 185 00:11:34,110 --> 00:11:37,679 Paul Budde: new things would happen and there would be rivers of new 186 00:11:37,920 --> 00:11:41,458 Paul Budde: revenue would flow in. None of that is eventuating and 187 00:11:41,458 --> 00:11:45,358 Paul Budde: that's the continuous message now, for the last 10 or 20 years. Since 188 00:11:45,360 --> 00:11:48,929 Paul Budde: the internet arrived, since the smartphone arrived, a lot of 189 00:11:48,929 --> 00:11:54,150 Paul Budde: the extra value is going away to call it the 190 00:11:54,150 --> 00:11:57,780 Paul Budde: Big Tech companies, the digital companies, the Googles, the Facebook, 191 00:11:57,780 --> 00:12:02,250 Paul Budde: the Amazons, et cetera. There's very, very little hope for 192 00:12:02,250 --> 00:12:07,110 Paul Budde: telcos to actually tap into these new revenues. They're still 193 00:12:07,110 --> 00:12:09,210 Paul Budde: a good job, it's a utility, but then you have 194 00:12:09,210 --> 00:12:13,230 Paul Budde: to start looking at them as gas, electricity, water, et cetera. 195 00:12:13,469 --> 00:12:13,529 Sean Aylmer: Yeah. 196 00:12:13,530 --> 00:12:15,899 Paul Budde: Then obviously, the share price is rather different. 197 00:12:16,529 --> 00:12:18,270 Sean Aylmer: Paul, thank you for talking to Fear and Greed. 198 00:12:18,600 --> 00:12:19,588 Paul Budde: My pleasure, Sean. 199 00:12:20,250 --> 00:12:23,760 Sean Aylmer: That was Paul Budde, telco expert and investment advisor through 200 00:12:23,760 --> 00:12:27,059 Sean Aylmer: Paul Budde Consultancy. This is the Fear and Greed Business 201 00:12:27,059 --> 00:12:29,639 Sean Aylmer: Interview. Remember, this is general information only and you should 202 00:12:29,639 --> 00:12:33,120 Sean Aylmer: always seek professional advice before market investment decisions. Join us 203 00:12:33,120 --> 00:12:35,129 Sean Aylmer: every morning for the full episode of Fear and Greed, 204 00:12:35,129 --> 00:12:39,000 Sean Aylmer: Australia's best business podcast. I'm Sean Aylmer, enjoy your day.