Optus sacrifices margin to keep market share

Stuart Corner
Thursday, 09 February 2006 06:49

IT Industry - Strategy

Optus' results for the quarter to 31 December show an operator "aggressively maintaining its market position in highly competitive market, and sacrificing margin to do it," according to Ovum research director, David Kennedy.

He commented "So far, last October's bucket pricing promotions have halted mobile market share loss, but haven't translated into market share growth. Nor has Optus' ULL network had time to roll out. It's still early days on these initiatives, and next two quarter's results will bring a clearer picture."

Optus Mobile revenues grew by 3.3 percent to $1.05 billion compared to a year ago but operational EBITDA fell 1.9 percent to $384 million which Optus said reflected the continued impact of mobile caps and lower termination rates - offset by higher usage. Quarter on quarter revenue was up seven percent.

The churn rates among postpaid customers declined to 1.2 percent in the third quarter - the lowest for several years. Optus added 212,000 new subscribers but this increase was in line with overall market growth, Optus did not increase its market share. "Capped plans accounted for 29 percent of gross adds and recontracts in the December quarter. They now make up 14 percent of our total postpaid mobile base," CEO Paul O'Sullivan said.

Overall, Optus' year on year, revenue increased 4.6 percent to $1.87 billion while operational EBITDA was down 4.1 percent to $524 million. Net profit after tax fell 4.8 percent to $160 million but was 6.8 percent higher than the preceding quarter.
 
Cash capital expenditure grew as Optus continued to roll out new mobile and fixed line networks and carried on construction of its D-series satellites. Cash capital expenditure for the quarter was $307 million and free cash flow declined 60 percent to $135 million.

O'Sullivan said Optus was responding to a highly competitive environment by investing for future growth markets in its 3G network, Unbundled Local Loop (ULL) network and new satellites.