Small Competitor Poised to Capitalise on Recent Optus Turbulence

Investing

By: Greg Maxwell

Image source: Getty Images

With Optus's recent network outage, some investors are waking up to a new opportunity inside the Australian telecommunications market.

And it's not investing in Telstra  

While Telstra is the obvious choice for dissatisfied Optus users seeking alternatives, we might be witnessing a larger trend unfold. A trend, which, if the reports from the Telecommunications Industry Ombudsman are anything to go by, could present a significant problem for both major telcos. 

According to the industry ombudsman. Telstra was the most complained about telecom in Australia, notably accounting for 40% of the 17,777 complaints received by the ombudsman in the last quarter ending June 2023. What's more, Telstra accounted for 62% of the total complaints in the previous year, averaging about 203 complaints per day.

Optus aren't doing much better 

And things aren't much better at Optus either. Even prior to the recent outage, customer complaints to June had increased 29.5% following a massive data breach impacting the personal information of nearly 10 million customers. Astonishingly, the flood of complaints was so significant that the ombudsman had to implement new automated processes to manage the influx.  

Customer Service Revolution

While Optus faces massive customer backlash over their handling of the recent outage and data breaches, reports from the ombudsman clearly show dissatisfied customers won't be eagerly switching to their main competitor, Telstra, either. 

Customer service is increasingly becoming a key issue for telco customers. If you've ever been frustrated by poor customer service and the complexity of navigating bureaucratic processes for simple tasks, you'll understand why many customers are now exploring smaller, more nimble, and customer-focused alternatives. 

Motley Fool analyst Benny Ou has been closely following these developments, noting, "customer service has become a battleground for telcos, and it's one of the advantages some smaller providers can leverage and win new customers.  

Anytime call wait times are minimal, you get to speak to someone that is based in Australia, and the person on the other end is looking to solve your problem from the first call are all huge factors in people not only switching providers – but it's creating a raving fan base where ecstatic customers are recruiting new people to the brand."  

Market Share: There for the Taking?

In fact there's one telco doing all that, and catching the eye of Motley Fool analysts in the process. Its focus on putting customers first is clearly disrupting an industry where customer service has traditionally fallen short. 

What's more, it's customer focussed approach is clearly winning hearts and minds and positively impacting its bottom line, boasting:

  • Breakout earnings per share performance from $0.024 to $0.091, indicating a potential inflection point for the business.
  • Low debt, massive insider investment, strong financials with 23% revenue growth, and increasing margins as the subscriber base expands.

This all points to a considerable runway for future growth.

With this in mind, it may not be too long before shrewd investors start to take notice. 

It's no fluke that the analysts at Motley Fool Share Advisor recognising the potential, issued a buy alert back in March 2021, with growth of 2% a year since then – for a total gain of 5%.

Whatever happens, with customer dissatisfaction in the big telco players at all-time highs and this smaller company's breakout earnings year, it's unlikely to stay under the radar. If this trend continues, the price of this disruptive telco might not remain under $5 for much longer.

The full thesis and research for this customer-focused telco are available to Motley Fool Share Advisor's 20,000 plus members. 

What's more, If you act now, as a new member you get access to not only this research but over 70 other buy recommendations – All at a significant discount. 

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Returns as of 18 July 2024. Greg Maxwell has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. Past performance is not an indicator of future results and all investing involves risk of loss. For more information about The Motley Fool see our Financial Services Guide. All returns cited are hypothetical and based on the percentage change between the stock price at the time of recommendation and the current or sell price (if the position has been closed) at the time of publication. Brokerage, taxes and any other associated costs are not taken into account. Performance figures are not intended to be a forecast and The Motley Fool does not guarantee the performance of, or returns on any investment. Any money back guarantee is strictly limited to the subscription price paid for the product.