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Corporate buyers reconsidering Optus supply contracts

Phone Outage

Following Optus’ nationwide outage on 8th November, a number of corporate buyers are reviewing their options after experiencing wide scale economic disruption, leading to a potential loss of revenue for Australia’s second largest Telco.

The 14-hour outage, which halted Optus’ entire telephone and internet network affecting nearly 10 million customers, follows the worst cyber breach in Australian history which compromised the personal details of account holders and led to legal action. 

The telecommunications provider is under fire from all angles with investigations underway from the federal government and the Australia Communications Media Authority. 

Currently, Optus’ corporate customers include leading household brands such as Commonwealth Bank, ANZ, Westpac, ING and the Australian Tax Office.

Perhaps most concerning for Optus are its lucrative government contracts, with a reported $547.45m in contracts awarded since November 2020, including a huge $405m contract with the Department of Defence and $10.9m for internet services provided to the Australian Electoral Commission.

Victorian Premier Jacinta Allan confirmed that the state was reviewing its own contract with Optus following the major shut down of Melbourne’s train network and lack of phone service to 11 hospitals.

Commenting on the disruption in Victoria and confirming that Optus is one of the state’s 23 telecommunications providers, Allan said: “As we saw yesterday, it covers a really diverse range of different industry sectors for both us, but also too for private business and enterprise as well. Many small businesses couldn‘t operate yesterday.

“As a government, we will be undertaking our own review of the processes and the responses that were undertaken yesterday because it was incredibly disappointing.”

She added: “The Department of Government Services that’s responsible for the oversight of these contracts is also going to undertake its own review of both Optus’ response and where we can see further improvements that can be made, we’ll look at making them.

“[That review] will look at all the relationships that Optus has with the Victorian government and look at their response to [the] incident.”

Elsewhere, in another blow, South Australia Premier Peter Malinauskas confirmed his government was considering switching providers.

Commenting on the outage, Malinauskas said: “They have let their customers down throughout the state, including the government.

He added: “Telecommunications now is essential to the functioning of the Australian economy and it has a big impact on services across governments.

“If Optus wants to seek the government as a customer, they need to be a reliable service in this modern age, and this is a very unfortunate failing on their part that they will have to explain for themselves and I think should be held accountable in every respect possible.

“We have a contract with Optus, as do other governments around the country. That is something we will turn our mind to.”

Telstra’s CEO Vicki Brady has already confirmed that it has picked up new customers following the Optus outage. Speaking at an annual investor day in Sydney, Brady said: “We take zero pleasure in any competitor or operator experiencing major outages.

“Post last week’s outage, as you might anticipate, yes, we’ve seen some increase in acquisition of customers.”

She added: “There’s been some speculation about how large that could be, and I would just go back to the cyber breach last year, [when] we saw elevated acquisition levels for around a six-week period, but at the end of the day, there wasn’t a significant shift in share in the market.”

After the outage, reports surfaced that Optus CEO Kelly Bayer Rosmarin was considering her exit after two major crises in just 12 months, following increasing pressure to resign. 

Speaking at a Senate inquiry on Friday, Bayer Rosmarin dodged the speculation, saying: “It has not been a time to be thinking about myself”.

When grilled further by Senator Sarah Henderson, she added: “I haven’t seen any reports today, I’ve been preparing for being here.”

However, by Monday, it was confirmed that Bayer Rosmarin had formally resigned as Optus’ CEO as a direct result of the outage, confirming in a statement: “Having now had time for some personal reflection, I have come to the decision that my resignation is in the best interest of Optus moving forward.”

Bayer Rosmarin will be replaced in the interim by chief financial officer Michael Venter.

At the inquiry, Bayer Rosmarin confirmed that 228 triple-0 calls failed to go through, while 8,500 customers and small businesses have demanded compensation.

She confirmed that $36,000 had already been received by customers with $430,000 still under discussion, adding that during the outage a cyber attack was one of the key lines of investigation for several hours.

The cause of the outage was revealed to be the result of a routine upgrade overwhelming Optus’ system, causing 90 Optus routers to fail.

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