CNA Explains: Why the troubles plaguing Australian telco Optus matter to owner Singtel

SINGAPORE: Australia’s second-largest telco Optus suffered a network outage over the weekend, just over a week after a previous interruption that was linked to four deaths.

The latest outage occurred just as Singtel Group CEO Yuen Kuan Moon landed in Sydney on Monday (Sep 29) to meet with Australia’s communications minister. The Australian government had earlier asked to speak with the company’s representatives and discuss the major interruption.

In a statement on Monday, Singtel, which owns Optus, said the incident over the weekend involved a mobile phone tower in a New South Wales suburb, and is “totally unrelated” to and a “different type of outage” from the previous interruption.

Optus confirmed that one person who needed emergency services was affected by the outage over the weekend, but they successfully called for emergency services from another phone, the statement read.

After the meeting on Tuesday, the Australian communications minister said there is a “very serious lack of confidence” in Optus to deliver Triple Zero services to Australians.

She also said she sought assurances from both Optus and Singtel that they would prioritise restoring confidence in the Triple Zero system, or Australia's system for emergency service calls.

What is Optus and why is it making the news?

Optus is the second-largest telco in Australia, and it is a wholly owned subsidiary of Singapore’s own telco Singtel.

According to a statement by Singtel’s Group CEO on Sep 25, Optus is in the middle of an “ongoing transformation”, and current chief executive Stephen Rue was appointed 11 months ago to lead the charge.

Trouble has followed Optus in recent years. Before the outage over the weekend, it suffered an interruption that started on Sep 18, impacting 600 people across South Australia, Western Australia and the Northern Territory for more than 10 hours.

Some customers could not contact emergency services when they needed them, linking the outage to four deaths.

A deviation from standard procedures during a network firewall upgrade triggered the 13-hour outage in Australia, Optus said after the incident. The Australian government said it would investigate the "unacceptable" failure, and the company said it would cooperate with any effort to look into the incident.

This comes less than a year after Optus was fined A$12 million (US$7.9 million) by regulators for failing to provide emergency call services to thousands during a nationwide outage in 2023.

Optus also suffered a cyberattack in 2022 that affected the data of up to 10 million Australians.

Former CEO Kelly Bayer Rosmarin resigned in the wake of the earlier incidents, and Rue took over in November 2024.

Just days after the outage earlier in September, Optus was also hit with a US$66 million fine over “appalling” sales conduct.

A federal court ruled that the company should be punished for selling products to vulnerable customers between 2019 and 2023 that they did not need or want, leaving many in debt.

Many of these people were also Indigenous and lived in remote parts of the country.

The court formally approved the penalty on Sep 24, which Optus and the Australian Competition and Consumer Commission had agreed to in June.

What has Singtel got to do with this?

In 2001, Singtel launched a successful takeover bid for Optus, making the latter a wholly owned subsidiary of the Singapore telco.

Singtel, with Mr Lee Hsien Yang as its CEO at the time, acquired the company for about S$11 billion in 2001.

In his statement on Sep 25, Singtel’s Group CEO said the company has invested more than A$9.3 billion in Optus in the past five years, with a large proportion going into building network infrastructure across Australia.

In the financial year ending in March 2025, Optus generated A$8.2 billion in revenue for Singtel, accounting for half of the group’s total revenue. Optus is also one of Singtel’s largest overseas investments.

Why should Singtel be worried about Optus’ woes?

Singtel’s share prices fell by 3.8 per cent to S$4.10 after the market opened on Monday, before closing the day at S$4.12.

With 60.5 million shares transacted, it was one of the most heavily traded stocks on the Singapore Exchange by volume on Monday. The shares already lost about 3 per cent of their value last week, following the earlier interruption.

On Tuesday, Singtel shares fell by about 2.4 per cent to S$4.06 after the market opened.

The drop in share prices is likely to be related to the most recent outage over the weekend, since Optus is a major part of Singtel and its problems “just got worse”, said Professor Mak Yuen Teen, director of the centre for investor protection at the National University of Singapore’s (NUS) business school.

The market will look at what sanctions Optus may face in Australia and whether it continues to struggle with dealing with its problems there, he added.

“Optus accounts for about half of total group revenues but significantly less in terms of profitability, based on earnings before interest and tax,” said Prof Mak.

These incidents could affect investor confidence in Singtel, he said, adding that there is wider reputational damage not only to Optus but also its parent company.

These incidents with Optus could raise questions with authorities and stakeholders in other parts of Asia, especially in businesses where Singtel owns an entire or majority stake, said Prof Mak.

“Probably less so where they are associates and joint ventures which have their own arrangements when it comes to governance and operations.”

Director of the centre for governance and sustainability at NUS’ business school Professor Lawrence Loh noted that the Australian telco market is mature and strongly regulated.

Optus operates in a triopoly alongside Telstra and TPG Telecom, he added, stressing that the market is very competitive.

As the Optus board reports directly to the Singtel board, the "broader Singtel governance policy will also have a very big influence on how Optus provides governance", said Prof Loh.

Most of the other markets that Singtel is active in are emerging markets, unlike the situation in Australia, where expectations are higher. With the latest crisis, there may even be implications to Singtel’s credibility locally, said Prof Loh.

“Singtel has been grown organically within Singapore, so probably they really want to be a global player. They really need to strengthen their talent bench, or their managerial or governance set up.”

How has Singtel responded to these issues over the years?

Optus's CEO will need more time to turn around the embattled telecom carrier, Singtel's Group CEO said on Tuesday after meeting the Australian communications minister.

“We brought in Stephen 11 months ago to transform Optus, to really address the issues that we had since 2022-23,” Mr Yuen told reporters in Sydney. “It is very early days. It takes time to transform a company.”

He had also recently apologised for the emergency call outage earlier in September, adding that Singtel was "deeply sorry" to learn about the incident.

"Our hearts go out to the families and friends of those who have passed away and we know that Optus will get to the bottom of this matter," Mr Yuen said in his Sep 25 statement.

Singtel is working with the Optus board and management to ensure a "thorough investigation" to prevent any recurrence, he said then. "Optus has been cooperating fully and transparently with all relevant government agencies and regulatory bodies while the matter is being investigated and will share the findings in due course.”

The September 2022 Optus breach was one of Australia's biggest, in which the data of up to 10 million customers – including home addresses, driver's licenses and passport numbers – was compromised.

The incident prompted Australian Prime Minister Anthony Albanese to call for tougher privacy laws. When then-Prime Minister Lee Hsien Loong visited Australia a month after the breach, he said that all Singapore companies are expected to comply fully with domestic laws wherever they operate, and cooperate with domestic regulators to protect consumers’ interests.

In August, the Australian Information Commissioner sued Optus, accusing it of breaching privacy laws during the 2022 cyberattack.

Australia’s privacy watchdog is alleging one breach of the law for each of the 9.5 million customers affected by the data breach, with the court potentially able to impose fines of up to A$2.2 million per breach. It did not provide details on the total amount it is seeking.

Singtel’s response to the string of incidents “could have been better”, said Prof Mak.

“My perception is that it tended to view this as an Optus problem rather than a Singtel group problem. Local management was left to take the heat, and the group management and board have tended to stay in the background,” he added.

Just three months before the cybersecurity breach, Singtel announced in June 2022 that it was further decentralising its structure, giving the Optus management more autonomy over its enterprise business on top of its consumer business, he noted.

“When the cybersecurity breach happened, I looked into how Optus was governed and did not see a proper board with independent directors even though it was a major operating company. I thought then that Singtel did not pay enough attention to governance of a key subsidiary,” said Prof Mak.

When Singtel recently announced that it was restructuring the Optus board, it did not seem “sufficient”, as the directors on the board had past or current roles in the Singtel group, he added, adding that it did not appear to be an attempt to build an independent board to oversee the Australian telco’s operations and management.

“Singtel is not alone of course in underestimating the importance of proper governance over key subsidiaries,” he said.

Prof Loh echoed the importance of subsidiary management, adding that many companies do not give it enough importance.

Optus saw “several red flags in the past”, he said, highlighting the previous cyberattack and how it sold products to vulnerable customers.

“Now, given that it is a string of incidents, I don’t think you can say these are all isolated (incidents) anymore,” he added.

“I think if something fundamental is not solved, there’s a possibility that the issues will continue to fester.”

What should Singtel do going forward?

Experts noted that these incidents would not just affect customers’ confidence in Optus, but would also have legal and reputational implications.

Regulatory bodies, including those that protect customers, in Australia are “much stronger” and can impose significant penalties, said Prof Mak.

“It is not beyond the realm of possibility that Optus’ license to operate may be called into question. Australia also has one of the most aggressive class action regimes in the world, which may expose Optus to costly legal action from stakeholders,” he added.

The responsibility of resolving these issues would fall to Optus’ or Singtel’s risk management committee, said Prof Loh.

“They probably need to be more transparent about what has been done, or even what has not been done,” he added. “To restore confidence, transparency is the best way.”

They should also be prepared for possible lawsuits, since the outages involved lives, damages and possibly lost opportunities for businesses, said Prof Loh, urging the company to start taking action instead of waiting for investigations to be completed.

So far, Singtel has focused on “the hard side”, or infrastructure and technology. Now, they should look at softer issues like crisis management or even company culture, said Prof Loh.

The governance of a subsidiary is the "mother of all issues", said Prof Loh, adding that this is probably the “weak link”. Subsidiary governance is often not accorded with the necessary importance, he said.

Optus also has a much higher employee turnover, especially involuntary turnover, compared to the rest of the Singtel group, said Prof Mak.

“There are also many more complaints of breaches made by employees, including in its whistleblowing channels,” he added.

While this could be due to differences between the Australian and Singaporean environments, they could also be an indication of deeper systemic corporate culture issues at Optus, he said.