Telecom finally backing out of its 'cul-de-sac'

Telecom's management briefing in Sydney yesterday was a pretty sober affair but chief executive Paul Reynolds at least managed to put the disaster of the first half-year results briefing behind him and give the impression his hand is firmly on the tiller.

The webcast of the event is here and Herald coverage of the briefing is here.

The most striking slide in Reynolds' presentation was the one titled: "Shareholders have had a rough ride".

It shows a jagged graph trending steeply down over the last two years as billions have been wiped off Telecom's share value. As the graph peters out the words "management hiatus" are written as if in explanation.

Well, the hiatus is definitely over - Reynolds has a plan to transform Telecom, a plan he hopes will lead the ailing telco into a recovery along the lines of his old employer British Telecom.

Part of that is facing up to the mistakes his predecessors have made - the "mobile cul-de-sac" Telecom put itself in with CDMA mobile technology, which it will replace over the next few years with GSM-centric technology. It got the "political angle" wrong when it came to regulation, said Reynolds.

He will now slash operating expenditure to the tune of $300 million a year, something that will cause a lot of pain for Telecom employees who have already put up with years of restructuring. But it is necessary and Telecom can save a stack and do better at customer service by developing its online presence.

Kiwi ex-pat and Dell vice-president Andy Lark gave me the lowdown earlier this week on how online forums and an interactive service called Idea Storm are transforming how Dell deals with its customers.

If I can go online to sort out a problem, pay my bill (which I currently do) and get information from a community of users I've no problem with Telecom outsourcing its call centres somewhere cheaper.

Reynolds wants a million broadband connections with 85 per cent of lines supplied by Telecom Wholesale. He wants Gen-i to take 20 per cent of the Australasian ICT services market. He wants world-class customer service scores and over 50 per cent of the mobile market, a statistic that currently belongs to Vodafone. Those are all bold KPIs (key performance indicators) to aim for. Let's hold him to them.

A slide showing new services and technologies Telecom is rolling out tick all the right boxes. The next generation network is dead as a term as Telecom has been banging on about it for years. But up there are things like VoIP, software as a service, managed VPN, broadband and mobile value-added services. With Telecom's IT capability in Gen-i, the market in these spaces is Telecom's to lose.

Overall then, I think Reynolds was probably able to placate analysts yesterday, and shareholders who are willing to hang in there for the long-term.