In its latest report on the Australian telecoms market, analyst firm BuddeComm says that while overall telecoms services revenue of the Australian market was expected to have reached about $43.2 billion this year - slightly up on 2014 and a considerable improvement on both 2012 and 2013 – it has, in fact, been relatively subdued since 2011.
According to Budde research analyst, Henry Lancaster, revenue was negatively affected by poor results from Vodafone and Optus, largely due to competitive pressure on pricing among operators, as well as continuing economic uncertainty among some sectors of society, “which has lessened discretionary spend”.
Lancaster expects the trend to continue into 2016, with revenue growth limited to about 1% through to 2017.
“Positive growth is also anticipated from wholesale access to the NBN, with broadband providers such as Optus planning to provide services to up to eight million premises, or double the company’s existing footprint.”
Meanwhile, Optus recovered from the revenue decline reported in FY2014 to record a 6.7% increase in FY2015, while Vodafone (VHA), which Lancaster says has been dogged by steep revenue declines for a number of years on the back of customer disaffection with service offerings, reported a 2.9% increase in revenue for the first half of 2015, supported by a 2.1% increase in its retail and MVNO subscriber base.
But, Lancaster notes that Vodafone’s investments are clearly beginning to deliver rewards, resulting in a change in customer sentiments as it addresses “popular concerns over poor network quality and stability”.
Lancaster points to Telstra’s continual domination of the overall Australian telecom market, holding about 62% market share by revenue, even though the company’s share in some sectors, such as broadband, have been falling steadily.
“TPG has been propelled to the fore in the provision of broadband following its acquisition of iiNet in late 2015. Telstra advantage in being the first telco to deploy LTE has also diminished as Optus and Vodafone now nearly match population coverage.
“Operator fortunes are now less in attracting new customers as in retaining existing ones, which is being achieved by more generous data caps and the reliability of network infrastructure.
“Just as Optus and Vodafone have begun to emerge from several difficult financial quarters, second-tier players including Macquarie Telecom, M2 Telecom and TPG - having recently acquired iiNet - continue to report strong revenue growth.”
According to Lancaster, the number of mobile subscribers has reached about 31.4 million, giving a penetration of around 133%.
“There were just over six million mobile broadband subscriptions in June 2015, representing about 20% of the total. About a quarter of mobile broadband subscribers are now on LTE networks, a proportion which will grow rapidly into 2016 and beyond,” Lancaster forecasts.
“LTE remains a relatively nascent technology, with regular improvements entering the market aimed at optimising network capabilities. While much investment remains in LTE, there is also a surge in interest in 5G, designed less to manage traffic as to connect billions of devices.
“By 2017 Telstra plans to begin closing down its 2G infrastructure, which now accounts for only about 1% of total network traffic. By 2025 it is expected that Australian MNOs will begin the process of closing down 3G infrastructure as well, leaving investments concentrated on LTE and 5G.”