What you need to know:

• Optus suffered a serious technical network outage on Wednesday 8 November that left about 10 million customers without services for at least 12 hours.
• The crisis is the second the brand has faced in 18 months and comes off the back of the cyberbreach attack in May 2022 which saw the data of 9.7 million customers exposed and $1.2bn wiped off Optus’ brand value.  
• While brand theory suggests the fallout of such a technical crisis would usually be short-lived for a brand and brands usually bounce back, the Federal Government’s plans to investigate what caused the Optus network outage, along with ACMA investigation into alleged failure to provide emergency services call access, will keep the brand in the headlines for all the wrong reasons.
• Brand experts, marketing academics and consultancies weigh in on the significant and negative ramifications for the Optus brand if it poorly manages the latest crisis in the face of the cost-of-living crisis and an increasingly irate and worried consumer.

Government intervention in the Optus network outage that left consumers and business across the country without mobile and Internet access for upwards of 12 hours this week could be the pointy object that punctures a firm hole in the telco’s brand equity and marketshare, several industry pundits believe.

The serious Optus network outage was first reported at 4.05am on 8 November 2023 and proceeded to wreak havoc across mobile and broadband services across the country. Along with consumers being unable to make 000 emergency calls on landlines, the outage triggered services and hospital lines shutdowns, grounded public transport services to a halt and saw businesses large and small unable to process payments.

By the end of the day, the unprecedented scale of the outage prompted the Albanese Government to announce a post-incident telecommunications review. Additionally, regulatory watchdog, the Australian Communications and Media Authority, has independently commenced an assessment to investigate Optus’ compliance with rules requiring emergency calls be successfully carried from mobile carriers to the Emergency Call Person (Telstra).

The network outage comes 18 months after Optus suffered a cyberbreach attack, one of the most significant in Australian corporate history, which saw the data of 9.7 million customers exposed publicly.

Yet as Macquarie University associate professor of marketing, Chris Baumann, told Mi3, the second-largest telco’s marketshare did not experience permanent downward trajectory over the last year in terms of real customer numbers. This is despite Brand Finance calculations in early 2023 suggesting the data breach wiped $1.2 billion wiped off Optus’ brand value.

According to 2023 figures, Optus’ mobile market share was down 2 per cent compared to 2021 reports (31 per cent), while NBN share was holding at 13.1 per cent in September 2023. Optus also has about 20 per cent share of the enterprise market. In its full-year financial report to 31 March 2023, Optus reported EBITDA growth of 4.5 per cent and 425,000 additional subscribers to its mobile customer base.

However, while brand theory and the nature of telco service switching behaviours both suggest Optus will bounce back after a short-term hit, what Dr Baumann saw upping the stakes this time around is government intervention into the technical failure as well as commercial impact.

“We don’t know yet about the impact – for starters, the government is now involved… that is a real public relations issue now,” he said. “And it’s not only private customers, but also corporate and government clients reacting and possible defecting.

“The idea of the phone has changed, and Optus is no longer just broad communications and SMS to meet for coffee. It’s very important for health, and transactions rely on these services. The question is if we’ll see a lot of corporate customers and government switching providers – that will have a big impact if it happens.”

This second government investigation into Optus, which comes after another government-led inquiry into the cyberbreach, was a concern also highlighted by Pollinate CEO, Howard Parry-Husbands.

“The investigation keeps the issue in the headlines and means the issues stays sharp. It therefore continues to puncture the Optus equity balloon, and the brand will likely start to lose a bit of altitude. Unless it acts quickly to restore consumer confidence,” he said.

Government + cost-of-living crisis = a risk-averse, wary customer

In concert with government intervention is the very real impact Australia’s cost-of-living crisis is having on consumer sentiment and risk appetite. Pollinate’s latest biannual Australia Pulse report found the top three concerns for all demographics across the country are the Australian economy, the cost of living, and household income.

“Our Australia Pulse data shows how fragile people are right now in terms of risk aversion in cost-of-living crisis. This is making people even more critical and careful in their decision making,” Parry-Husbands said. “I don’t think the tech issue itself is necessarily the problem – it’s the timing and optics. The government’s investigation keeps it as a pointy issue, and coupled with the fact consumers are in a more risk averse frame of mind, this therefore makes it hard for Optus to rebuild its equity. The need for clear and confident communications in a crisis is more acute than ever.

“If you got burnt yesterday as a business, you will switch. If your Optus service failed you, it’s very difficult. As an owner of a business, you don’t want to take that risk again; you can’t afford it. Enough businesses will be close to the end of their contracts to switch.

“But what will also happen is businesses whose contracts roll over in 3-4 months’ time, will look at this and wonder if it’s just less risk to go with someone else. The obvious answer is yes.

“The longer the cost-of-living crisis runs on, the more people will stay in that risk averse mindset. And the more this stays in the headlines, which is what governments do, the more risk aversion is applied to telcos as people come off contracts. That’s the difficult thing here. Those two actors are perpetuating the challenge for Optus and it’s not necessarily in Optus’ control, which is not necessarily fair. But it is what it is.”

For Parry-Husbands, this is where Optus has an opportunity to step in and do something about it. Even while highlighting data showing brands do bounce back, he believed it would be unwise for Optus to play down the tech vulnerability issue given the duration of the outage.

“I’m a consumer and it’s not obvious what’s happened. Then I have uncertainty. And it’s uncertainty that is driving to cost-of-living crisis. We just need to make it simple for people,” he said. “There needs to be a point made about what happened, saying sorry, and assurance Optus is minimising it happening again. That narrative, to a large extent, hasn’t happened.”

Brand communication and strategy fail

Which leads into views on how Optus has handled the immediate fallout and crisis communications. It was a harsh verdict from branding expert and director of business consultancy Intangify, Nick Foley.

“Here we go again. Another large Australian brand in the headlines for all the wrong reasons.  Let’s face it, taking out the Melbourne Metro train network, disabling crisis call centres in South Australia and freezing payment transactions for major banks across the country takes some going. If there was an Olympic event for technical chaos, Optus would surely be up for a podium finish,” he commented.

“Yet, it didn’t have to be this way. Following the cyber-attack last September, Optus assured its customers it had learnt from the data breach. The brand was clear in its objective to restore trust. Many Australians took Optus at face value and chose to remain with them. Little more than a year on, many customers must now be questioning whether they placed too greater faith in Optus. The expression ‘fool me once, shame on you. Fool me twice, shame on me’ feels apt.”

That’s certainly what’s playing out in the mind of Deakin University Department of marketing senior lecturer and industry engagement lead, Dr Michael Valos, who was struggling to see anything Optus has done well so far during this crisis.

“Essentially there were no responses, then slow responses then clichéd responses,” he told MI3. “Coming from the background of the 2022 hacking of 9 million customer records being made public a year ago and also considering a previous promise the company would release a PwC report into the reasons and possible solutions of a hacking to help other businesses avoid a future incident, Optus will struggle to recover.”

Dr Valos was a Vodafone customer in 2012, and said it took years to forget how vulnerable he felt with a poor telecommunications carrier.  Vodafone lost half a million customers and took a 10 per cent revenue hit in 2011 after they ran out of towers to service customer demand.

“Despite being offered special promotions, I cancelled. For me, phone problems were about productivity. But for some of the cases in the last 24 hours it’s about the impacts on people with critical illnesses or major revenue losses of small businesses,” Dr Valos continued, also noting the cost-of-living crisis should not be underestimated in the way the Optus brand will be perceived. “They will be far angrier than me, so I see negative sentiment just going off the scale.”

In the 24 hours following the network outage, mass media reports were filled with growing anger from customers and calls for financial compensation. Having stated a refusal to offer financial compensation, Optus had by Thursday afternoon promised customers 200GB of additional data by way of apology.

The data offer was met with scorn by several in the industry, who pointed out providing additional data was value-less given most consumers only use 15GB of data per month and really go beyond existing data limits.

Branding assessment and lessons

Foley brought the brand fallout back to Optus and its ability to build and retain the “less sexy” attributes of integrity and competence, not just relevance and distinctiveness.

“Or put more simply, trust. It’s a classic complimentary play, because you can’t build a successful position without firing on four variables. Based on what we’ve seen this week, it would’ve been prudent for Optus to double down on building its ‘integrity’ and ‘competence’ measures over the last year,” Foley said.

“Such an approach would’ve ensured the brand was match fit for the veritable storm cell it now finds itself in.

“A brand serves three core purposes. In the early days, it acts as a ‘foundation’. Over time, it enables ‘premiumisation’.  As VW learned the hard way with ‘Dieselgate’, brand can also act as a ‘salvation’ when things go awry. We’re about to find out just how well equipped the Optus brand is to offer a much-needed pathway to redemption for the company.”

Dr Valos agreed in terms of brand options, quality or reliability are off the table for a good five years.

“When you’re in such a cost-of-living crisis, I think low price is the only way out to minimise the losses,” he claimed.  

“In 2011, Toyota had a major crisis where cars accelerating in a random manner combined with brake problems. It was caused by losing control of a decentralised spare parts supply chain. Nevertheless, they bounced back within a couple of years based on decades of strong branding and reliability. It’s totally different to this scenario.”

Dr Baumann saw it as a seesaw between the short nature of human memories, the time it takes to come to a government investigation report, and the ratio of emotional versus financial implications will also play a part in whether Optus sees real loss from the latest crisis long term.

“There could be real pain and real loss if you’re a small business only, or if you compromise emergency services,” he added. “But the emotional cost for the average consumer may not be all that high – it’s not the brand you put a t-shirt on in order to promote and you go crazy for or defend. Think about Harley-Davidson in comparison – people are real ambassadors. That isn’t really what’s happening with a telco provider. You are either satisfied or not – that’s the end of the conversation.”