Telstra fudging the numbers on our ULLS margins, says Optus

Stuart Corner
Wednesday, 11 February 2009 03:54

IT Industry - Market

Optus has accused Telstra of using out of date and inappropriate data on Optus costs and margins to try and claim that a $30 ULLS price would still leave Optus, and other access seekers, with adequate margins on ULLS based services.

Optus made the claim in response to Telstra submission to the ACCC's enquiry into Telstra's ULLS access undertaking.

According to Optus, "Telstra's submission quoted an out-dated Optus investor presentation and historic financial reports to support its view that access seekers generate high margins on ULLS.

Telstra therefore inferred that moving to a price of $30 per month for access to the ULLS would have a limited impact on the margins of access seekers and would not negatively impact upon the state of competition." Optus says these statements "are misleading and do not present a true picture of the returns available to access seekers using the ULLS.

As a result they should be given no weight in the Commission's assessment on Telstra's ULLS Undertaking." According to Opus, Telstra used data that were three years old - in an Optus presentation from June 2006 - to estimate Optus' ARPU, monthly costs and capex charges.

 "This presentation...merely highlighted the gross margin improvement through the reduction in interconnect costs as between services offered over ULLS rather than resale.

It did not present a true EBITDA margin analysis taking account of the additional costs Optus would incur to utilise ULLS." Optus further accused Telstra of combining financial date from different reporting periods: "a piecemeal approach [that] clearly undermines the validity of the end results as Telstra has simply strung together historic information without any justification of how it may relate to Optus' present situation." Optus concluded: "The reality is that whilst using the ULLS affords access seekers lower costs than resale (leading to higher returns), access seekers must pay more than the monthly access charge to utilise the ULLS.

Optus submits that access seekers incur significant capital, once-off and recurring operating costs in addition to the access charge paid to Telstra [and] Telstra does not appear to have adequately accounted for all of these costs in its analysis." Furhter, Optus notes that "the Imputation Testing Reports that Telstra submits to the ACCC quarterly indicate that Telstra makes an imputed margin of -6.24 percent on a bundle of ADSL and voice package (using historic costs)...based on a ULLS access price of $14.60."