AUST Business today (excerpt):
Smart meter contract a Telstra game-changer
Telstra has entered into two major contracts with the giant Intellihub group that will be a vital part in the dramatic transformation of Australia’s largest telecommunications company.
While later this week shortterm analysts will pore over Telstra’s interim report, longterm Telstra investors need to understand how this transformation will unfold and the significance of the Intellihub arrangements.
At the heart of the transformation are two separate but closely linked growth areas – first the expansion of what will become a data-based toll road called the “internet of things” network, and second, its energy thrust.
In combination, they provide Telstra with a long-term growth path that will differentiate it from conventional telecoms companies around the world.
To understand this growth path and realise the threat that Telstra energy poses to the current power providers like AGL and Origin, we need to look deeper into the Intellihub arrangement.
Intellihub is Australia’s largest electricity smart-meter provider.
It became a metering powerhouse when Pacific Equity Partners brought together several metering companies led by led by Origin’s Acumen, which it sold in 2018 for just $267m. Intellihub is now worth about $3bn.
Smart meters were originally devised to avoid sending readers to each dwelling, but they can now manage elements of household power usage more efficiently, and when combined with a mobile phone network a vast array of new opportunities arises.
Intellihub has about half the smart-meter market in Australia and has agreed to use Telstra SIM cards in all its new meters – a massive $100m order.
Most of the major power companies in Australia, led by Origin, use Intellihub meters for part or all of their meter requirements.
The Telstra SIM cards relay data back to the power provider via Telstra’s data “toll road” network, and they are being used for a much wider range of activities, which increases traffic.
Telstra is also rapidly expanding its secure “toll” network alongside its mobile phone infrastructure to handle the vastly increased data expected to be transmitted. There must be no security leakage.
The booming use of this communication method and the transformation coming in energy means that this Telstra network will be a major infrastructure revenue source in the years ahead. Like a conventional toll road, greater usage delivers greater revenue.
Telstra plans to enter electricity retailing later this year, so when Intellihub announced its Telstra deal, there was understandable concern among Origin and other power companies. Telstra has gone to some lengths to assure users of its “toll road” network that there will be no leakage because security is at the essence of the infrastructure operation.
But there is a second part to the Intellihub/Telstra deal.
Intellihub has been awarded “preferred meter supplier status” in the giant Telstra electricity rollout.
What makes this deal so significant to Telstra and the nation is the huge gap in the Australian power retailing market that Telstra looks to fill.
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