On the Hot Seat With Telstra's Sol Trujillo

Sol Trujillo, CEO of Australian operator Telstra, spearheaded the company's transformation from a traditional telecom firm into a global communications giant. The former CEO of Orange and one-time president and CEO of US West (before it became Qwest) talked with FierceWireless editor-in-chief Sue Marek about Telstra's success with HSPA, the iPhone's potential entry in Australia and why he didn't choose WiMAX for Telstra's NextG network.

FierceWireless: What has been your biggest achievement at Telstra so far?

Trujillo: The board recruited me for a major turnaround or transformation. Because it's more than a turnaround, it's a redefining of the business. The way I've described it to the financial markets is that we are building the next-generation media com company.

We are on or at plan on everything we are doing. We have changed the game in wireless. We changed the game in broadband. And we are changing the game even with what some regard as our old telco product, PSTN. We have world-leading results in all categories.

FierceWireless: Why do you think you have been so successful in increasing market share and increasing your ARPU in the wireless sector?

Trujillo: The key is that when I got here two years ago, Telstra was like every other wireless player in the market. Meaning, we all delivered voice capabilities and we sold things the same way. We all had the same stores. You'd walk into the store and on the left-hand side of the store were the handsets and on the right-hand side of the store were the peripherals. All you did was have a conversation about a price plan. That was the classic wireless scenario for 20 years. I believe that wireless is now essentially at the same point as fixed line broadband was in the mid-90s. Wireless now is a capability that allows you to be real-time, it allows you to have any media and access information and make calls and be entertained if you have a high-speed broadband wireless network. I made a decision to change the game. We built out our NextG network, which deployed HSDPA at that time. We launched with 3.6 Mbps. We built a nationwide network in 10 months. We turned it up in one day, which is a paradigm no one else had done before at that time. We started offering services that when you click on a button, things happen. As opposed to the old story in wireless where you click and wait several seconds before anything happens. We have a nationwide network that is now operating at 14.4 Mbps. The handsets are operating at 7.2 Mbps. And we have data cards; we call them Turbo cards that are enabling people to take their desktop with them wherever they go.

We are changing the paradigm about utility and value. We are selling this service in a dramatic fashion. Part of it was the declaration that I made that said we are going to change the game and we are going to win at 3G.

There are certain things that we are going to win at Telstra. I'm a believer in the Wayne Gretzky theory of management-you go to where the puck is going to be. In our industry, clearly winning at broadband is core. Winning at broadband in wireless, which means 3G and winning at PSTN.

We are taking market share, particularly in the postpaid arena. What is happening is consumers are making choices. When they migrate from 2G to 3G they are spending an extra $20 per month. We have gone from being last in terms of 3G penetration, to today where we are No. 1 in the world in terms of 3G penetration. Over 30 percent of mobile subscribers are 3G subscribers.

FierceWireless: You said you launched 3G in one day. In the U.S. it's always a challenge to not only launch an entire network at once, but also to make sure that there are devices available that work on the network. How did you get that to work?

Trujillo: We work closely with all our vendors and we brought in a Chinese vendor, ZTE, who helped us customize a device which worked well.

We also launched a device from Samsung in the market that we call our wide-screen phone. People always say they would never watch TV on their mobile phone. In Australia almost 6 percent of our NextG subscribers subscribe to our cable TV service, which is called Foxtel. We offer 31 channels. We enable our subscribers to be able to access the set-top box remotely so you can look at the schedule and because you are at work you can make sure you record what you like and you can do that through your mobile device. You can look at the schedule and set up the recording.

It uses our HSPA capability. Not only are we operating a network at 14.4 Mbps but we also have the uplink of 1.9 Mbps. There is no network in the world like ours.

FierceWireless: People are paying $20 a month for these extra capabilities?

Trujillo: Our ARPU is running differentially from 2G to 3G $20 per month. It depends on what segment you are in. Some want Foxtel. Some are buying our Turbo card. Our average revenue per subscriber on our Turbo card is $100 per month.

There is a paradigm shift for the industry. We are moving to the next wave of growth opportunity. Because when consumers can use their devices for more than voice calling and get instant response all of the sudden you think about the utility of mobile much more broadly.

We have people making video calls. We haven't promoted video calling capability but we will during this coming year. But when we reported our results June 30, we had more than 1 million video calls from individuals that are finding the utility of this. Our technicians are using video calling when they run into a problem in the field and they need help. They can show them the sites and the location.

We have construction companies that are using it to have someone in the field show them progress on a site. People are buying laptops and Turbo cards for their employees because they are saving money and moving faster.

Let me give you a couple statistics. Our fiscal year started July 1. In Q1 2008, we grew our non-SMS data revenues by 90 percent. Now Vodafone in Europe reported 32 percent growth in the first half of 2007. In Europe, Telfonica grew their data revenues by 36 percent in the same period. In Q1, we believe we achieved a world's first for GSM mobile operator where non-SMS data revenue was greater than SMS revenue for the first time. I believe we can take our 3G mobile customer base from 30 percent today to by the end of 2010 to 50 percent to 60 percent of our base.

FierceWireless: What do you think that U.S. carriers can learn from your experience?

Trujillo: The one thing I would say is that every company is unique in terms of their current circumstance. I've operated on three different continents. Every company is unique. I organized our business around the experience that I wanted our customers to have. If you look at how we launched NextG network, I eliminated standalone P&L. What happens is if each leader is trying to optimize P&L they can't operate and think for a complete customer experience. That's a natural phenomenon. So you have to make organizational changes and choices. We are integrating everything-we own cable, telco, broadband, a Yellow Pages business and mobile. We are going to provide integrated experience. Customers are saying that they want us to make it simpler and make it work together. We are on that path. That's a structural choice I made.

The second thing is that you have to be bold. You have to take some risks. In our case, we have made a leap of faith in this real-time high speed media experience. We had to make the bet that it would happen and customers would buy it. We've made everything simple for the customer to use. One button, one click, one touch. If you want to watch our Foxtel cable TV service, we have one button with Foxtel on it. You push it and you get Foxtel. We also have an ISP portal, called BigPond. We have one button that says BigPond and you are in BigPond. You don't have to read a manual, you don't have to go through training to do it. That's been the problem for the industry for the last 20 years.

FierceWireless: It sounds as if you have solved the user-interface problem. That's a problem here and is one reason why many believe the iPhone has been so successful.

Trujillo: Apple has done a terrific job. If I see an icon and I know what it is intuitively that is a great thing. That's why I'm excited about wireless. I believe there is a big next wave of growth for all of us. Those who move first and move fastest will get the most. You make it simple, easy and fast and consumers will use it.

FierceWireless: What do you think of the iPhone? When will it come to Australia?

Trujillo: I think Apple plans to come to Australia. Australia isn't the biggest market in the world so they will take it in sequence. I do think it's an interesting product and a breakthrough product. We do not have an agreement with Apple. We will have a conversation with them when the time comes.

FierceWireless: What do you think of WiMAX?

Trujillo: When we were making technology choices and we were going to make our turnaround, we looked at WiMAX and HSDPA and all the technologies out there. We thought the WiMAX was not ready for primetime. It had more restricted applications and use. So we made an HSDPA/HSPA decision because we could easily migrate to 4G/LTE or whatever the version is that you want to talk about down the road. We had all the technology and vendors were lined up. Capital was being lined up. And you didn't have to do what I call 'unnatural acts' because one of the most important things to think about is handsets. You can support a technology but if there is no infrastructure to support it, it takes a long time.

I've been in this business a long time-over 30 years. I've seen how technologies are deployed. You have to have a full ecosystem in place or it takes a very long time. With 3G, the whole world spent billions investing in 3G. And 3G happened three or four years later than people thought. And that's with every vendor and operator investing billions. When you think of another technology where only certain operators and certain vendors are investing in that technology, will the ecosystem be advanced enough and strong enough for you to make big bets with? For us, it was clearly HSDPA. We are pleased with it. We are in markets, taking market share, growing ARPU and making our customers happy, which is what we all want to do.

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