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Optus results 'stable' Featured

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Optus and its parent SingTel have announced their annual financial results. Revenues are down and profit up – both marginally. But Optus is holding things back.

Optus comprises around two thirds of the whole SingTel Group. The tail is wagging the dog. Its revenues last year were $8,934 million (S11 451 million), while the revenue for the entire Group were S$18,183. Optus revenues last year declined 4.6% in Australian dollars, but 6.7% in Singapore dollars.

Optus has described its most recent financial results as “stable”. In the last quarter EBITDA (earnings before income tax, amortisation and depreciation) grew 3% to A$700 million against a backdrop of negative revenue growth in the Australian mobile industry.

In the quarter, operating expenses declined 9% to $1.49 billion “driven by lower acquisition and retention costs, workforce restructuring to drive productivity improvements and improved cost discipline.” For the financial year ended 31 March 2013, Optus reported a 1% increase in EBITDA to $2.38 billion, despite a 5% decline in revenue.

Kevin Russell, Chief Country Officer said, “Optus is focused on driving sustainable, profitable growth and positioning itself to capitalise on mobile data revenue growth. We are committed to rekindling the spirit of the Optus brand with a transformation program that fundamentally improves the services we deliver to our customers.

“Customers are already experiencing the impact of this transformation through an increased focus on our branded retail footprint and usage alerts which help them manage their spending and caps on excess data. Such initiatives are already making an impact with mobile postpaid retail churn, reducing to 1.6%, versus 1.8% during the preceding quarter.

Russell also referred to Optus’s recent purchase of digital dividend spectrum, which he said reflects Optus’ strategy of meeting growing customer needs for connectivity by optimising investment in spectrum and in cell sites, supported by maximising opportunities to share infrastructure. “Optus is very well-placed to execute a major combined network rollout that will support a strong and sustainable experience for our customers moving forward,” said Russell.

In Mobile, Optus reported an increase in margin and EBITDA despite lower operating revenue. The lower revenue has not adversely affected EBITDA, as the continuing effect of mandated reduction in mobile termination rates reduced traffic costs, equipment sales delivered lower margins and the service credits under the device repayment plans were offset by lower device subsidy costs related to these plans in the quarter.

Optus added 28,000 postpaid mobile customers in the last quarter. Postpaid customers now comprise 57% of the total base, up 2 percentage points from a year ago. Prepaid subscribers remained stable at 4.09 million. Optus grew the number of 4G mobile handsets on its network to 785,000.

In Business and Wholesale fixed, EBITDA improved $10 million while EBITDA margin increased 2 percentage point. In the Consumer and SMB fixed business, EBITDA increased by 9.3% on lower operating expenses. The lower ARPU (average revenue per user) from discounted bundled plans has resulted in on-net revenue declining by 4.8%.

The ARPU decline must be a worry. ARPU for postpaid customers declined 10.8% for the year, from $65 to $58. In the last quarter it was down to $54., an even steeper decline.

Optus is changing – we have seen that with the restructure of Optus Business, the increased focus on Optus branded retail, and stringent cost cutting. ‘Stable’ financials are probably the best that can be hoped for in this environment. The next year or two will tell if it’s enough.

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Graeme Philipson

Graeme Philipson is senior associate editor at iTWire and editor of sister publication CommsWire. He is also founder and Research Director of Connection Research, a market research and analysis firm specialising in the convergence of sustainable, digital and environmental technologies. He has been in the high tech industry for more than 30 years, most of that time as a market researcher, analyst and journalist. He was founding editor of MIS magazine, and is a former editor of Computerworld Australia. He was a research director for Gartner Asia Pacific and research manager for the Yankee Group Australia. He was a long time IT columnist in The Age and The Sydney Morning Herald, and is a recipient of the Kester Award for lifetime achievement in IT journalism.

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