Tuesdata: Why Optus faces a long journey to reputational recovery

Welcome to Tuesdata, our weekly analysis for Unmade’s paying members.

Today, a fortnight on, we analyse the consequences of Optus’ network crash, and the communications mistakes that cost the company’s CEO her job.

Further down, a slight improvement on the Unmade Index.

‘It’s going to take them a couple of years to recover from this’: how Optus botched its crisis response all over again

Seja Al Zaidi writes:

In just over a year, Optus has faced two seismic PR crises that have seen the telco’s reputation shredded in the eyes of the public, politicians and the press.

After beginning to bounce back from its previous disaster, this one will take Optus longer to recover from, PR experts believe.

Last October, Optus experienced a data breach that saw the personal information of 10 million customers – about 40% of the Australian population – stolen and exposed.

Three weeks ago, the telco experienced a full scale outage that saw millions of Australians left without connectivity of any kind. The outage blocked more than 200 emergency triple-zero calls and left many businesses unable to talk to customers or take payments. Yesterday the government announced the terms of a review into the outage which will report back early next year.

After bodging the communications response a second time, it was soon clear that CEO Kelly Bayer Rosmarin would struggle to survive. Twelve days later, she was gone.

The question now is how quickly the brand will recover from the second hit on its reputation.

Data seen by Unmade generated from YouGov’s BrandIndex service demonstrates that in the aftermath, belief in the telco plummeted on all key metrics including customer satisfaction; being a good place to work; value for money and recommendation to friends and family.

BrandIndex tracks brand health and sentiment based on an online panel of consumers.

The data seen by Unmade ran until November 20.

The net score is a representation of the percentage of positive responses minus the percentage of negative responses. Respondent sizes were approximately 850-950 for each attribute besides satisfaction, which was a respondent size of approximately 400-450.

From tracking to a net score of around +10 in the months before the outage, Optus declined to a negative net score approaching -20 on quality perceptions.

Right before the outage occurred, customers thought Optus was better value for money than both Telstra and Vodafone. That changed dramatically right after the incident, with Optus’ net score going from approximately 7 to -20 in less than a couple of weeks.

When customers were asked whether they thought Optus represented good quality compared to its main competitors, Telstra and Vodafone, responses became overwhelmingly negative as soon as the latest crisis hit. Prior to that, sentiment was at its lowest in early January, when Optus was still working to make a recovery from its hack three months prior.

Customer satisfaction with Optus also took a sharp nosedive in early November following the outage. Telstra was the telco with the most consistent customer satisfaction, while Optus and Vodafone went neck in neck on their scoring, mainly hovering in the low positives throughout the year. Optus’ score continues to crash weeks after the crisis, with no sign of rising back up anytime soon.

Before the new disaster, on several occasions throughout 2023, Optus had overtaken Vodafone and even Telstra in perception of ‘good quality’. Optus ranks second in telco market share at around 31%, after Telstra.

Communications practitioner Amber Daines says that Optus will find it more difficult to bounce back from the outage because of its previous reputational hit. “With crises, sometimes things happen in isolation and sometimes it’s a whole story of disaster,” says Daines.

“For Optus, it was pretty much a year to the day from when they had the hacking disaster to this latest issue.

“It became something where people thought ‘not again, how can this happen again?’. Even though there were separate events, I think the timing and the way in which it was made to be handled the first time had people paying a lot more attention to how they were going to manage it from a communications point of view with their customers the second time around.”

How Unmade saw last year’s Optus hack disaster:

Adds Daines: “Trust is one of those things in corporate culture where it can take years to build and moments to crash. The missteps and the communication style of the leadership team also really undermine people’s ability to trust them because the information was slow. It wasn’t always correct.

“Even if you have not a lot to say, the most important thing is communicate early and communicate often, even if it is to say ‘we are investigating this’ or ‘we’re not 100 percent sure we’ll be back online but we’re working towards x, y and z’.”

However, Daines points out that brands are resilient, and do bounce back. The banking inquiry is one example, she argues. “If you think about the Banking Royal Commission, 2018 probably feels like a lifetime ago to lots of people and there was lots and lots of scandals in that.

“However, not many people really changed banks as a result of that. People’s memories are not as long as you think.”

There’s a tangible consequence to this reputational tumble for Optus. Competitors are set to benefit greatly from their fumble, at least in the short term. Prepaid provider Kogan Mobile, which uses the Vodafone network, said its eSIM sales rose by a significant 400% during the outage, and TPG, which also uses Vodafone, experienced its busiest sales day in the last year.

Analysts at investment bank JP Morgan told clients that market leader Telstra, would see its bottom line boosted off the back of the Optus saga. If only 2.5% of Optus customers switched to Telstra, it could grow earnings by $125 million, they said.

Throughout the year, Optus has largely scored negatively when it comes to whether or not customers would recommend the service to a friend. Telstra scored consistently positively, and Vodafone straddled right between the two. Again, Optus saw a seismic crash in its opportunity to be a recommended product, and shows no signs of recovery at its existing scoring of -20.

One metric where Optus skyrocketed above its competitors was ‘buzz’ – customers confirmed that they’d heard either negative or positive buzz about Optus, with the +45% score continuing to shoot up even days and weeks after the actual outage occurred.

Patrick Southam, co-founder at crisis comms consultancy Reputation Edge, who worked at Optus as a government and public affairs manager between 1995-1997, predicts it will likely take at least until 2025 for Optus’ reputation to bounce back.

“It’s going to take them a couple of years now to recover from this,” he says.

Southam says customer churn from Optus to Telstra is likely to be amplified by newer, easier methods of switching providers. “It is easy enough to churn if you can take your number with you, and you can actually do it online now too. They’re going to feel a bit of pain over the next couple of years, they’re going to lose customers and their reputation at the moment is pretty much in tatters.”

Despite that, he thinks it’ll take ‘only a few years’ for Optus to rebuild and regain its reputation.

According to Daines, Optus now faces a hard slog. “I think it’s on a rebuilding trust path. I don’t think it’s necessarily going to be rainbows and unicorns. They’ve definitely got a lot of work to do. They’re not going to go away in a hurry. We are in a market where they hold a huge market share, but they do have to do better, and they need to communicate what they’re doing and how they’re doing it with customers, and really rebuild that trust pretty quickly.”

And what of the crisis lessons of the day? Says Southam: “Best practice would dictate that you’ve got three things to do. Communicate early, honestly, and clearly. They didn’t do any of those things. It took them seven hours to communicate.

“The mishandling of the crisis became part of the story.”

Daines adds: “The CEO perhaps was not present early enough. Sometimes saying the word sorry is the hardest word for a leader, but that can often mean a lot more to the customers than it does even to you. People just want to feel like you are empathising with them. And that comes across, I think, in all your styles of communications, whether you’re doing radio interviews or whether you’re issuing a statement,” Daines added.

Bayer Rosmarin failed to show sufficient empathy, argues Daines. “There has to be some sort of emotional connection for people in your responses, rather than just relying on technical information and thinking that’s going to satisfy people. People are losing money, they’re not able to get to their jobs or not able to get through to triple zero. This is really serious stuff and that does require a degree of empathy. She lost faith with customers, with commentators, and even became at loggerheads with the federal government.”

Southam was also critical of Bayer Rosmarin. “She didn’t strike me as a confident performer at all, frankly. A bit of a deer in the headlights; she didn’t inspire confidence in me, and I think the very fact that they she was calling radio stations instead of fronting a press conference probably tells you what you need to know.

“She wasn’t a strong media performer and was mouthing platitudes.”

Unmade Index edges back up

Seja Al Zaidi writes:

The Unmade Index, which measures the performance of ASX-listed media and marketing stocks, moved 0.42% upwards to 598.9 points yesterday.

ARN Media’s 2.76% rise in share price led the charge. Ooh Media followed with a 0.74% lift, and Southern Cross Austereo 0.49%. Nine rose 0.26%.

Sports Entertainment Group, owner of SEN, had the largest dip – 6.67% – while Aspermont dropped 8.33%. IVE Group fell 0.99%, and Domain 0.86%.

Time to leave you to your Tuesday. We’ll be back with a midweek update tomorrow.

Have a great day.

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