Thursday, 11 August 2016 19:11

Optus profits down under ‘intense’ price competition Featured


Australia’s second largest telco Optus has suffered a drop in profit for the June quarter, with the fall attributed to an ACCC decision to get tough on mobile termination rates in the telecoms industry.

Optus reported that net profits for the quarter had come in at $173 million, a fall of 12% on the corresponding period last year, while revenue dropped 13% to $2 billion for the quarter, down from $2.30 billion for the corresponding period a year ago.

As well as the Australian Competition and Consumer Commission’s regulated reduction of industry mobile termination rates from 1 January, Optus says higher service credits associated with device repayment plans, and lower equipment sales also impacted profitability.

Despite the double-digit drop in revenue and profits, Optus chief executive Allen Lew says it was a “quarter of stable results” as the company continues to transform its business through compelling content, network investments and “plans that capitalise on the EBITDA grew 0.7% to A$645 million for the quarter ended 30 June 2016, despite a 13% decline in operating revenue”.

"This was a very busy quarter, as price competition remained intense, especially in the MVNO market," Lew said.

"We've competed effectively with our branded, wholesale and fixed line products, and have focused on delivering a quality live video experience, starting with the launch of the Optus Sport channel in early July. We have already received some very positive responses from customers who've seen our first live broadcast of international soccer games."

EBITDA growth was affected by device repayment plan service credits, and net profit for the quarter was $173 million. Excluding exceptional items relating to a provision for workforce restructuring, underlying net profit declined 1.9% due to higher financing costs.

Optus reveals net additions of 19,000 post-paid mobile customers for the quarter, with post-paid operating expenses falling 20%, driven by lower domestic interconnect costs associated with reduced termination rates, lower equipment costs and lower customer acquisition.

Higher churn from the introduction of customer identification verification regulations contributed to a decline in the pre-paid customer base of 24,000, Optus said.

On 4G services, Optus says demand continues to grow strongly, with a further 1.2 million customers joining its 4G network over the last 12 months.

The telco says 257,000 4G customers were added during the quarter, reaching a total of 4.93 million 4G customers at the end of June.

And, 4G Plus customers now account for 53% of Optus’ total mobile customer base.

In consumer mass market fixed, the telco says quarterly operating revenue grew 4%, due to take-up of Optus TV, growth in its NBN customer base and NBN payments, and strong demand for resale DSL in regional markets.

Optus now has 136,000 NBN Broadband customers, up from 54,000 customers a year ago, and Optus an overall total of 1.08 million broadband customers.

Optus' parent company, Singapore-based Singtel, also released its quarterly report on Thursday, with Singtel Group chief executive Chua Sock Koong saying the company had delivered a strong performance for the quarter, underpinned by its resilient core business and increased contributions from regional mobile associates.

Singtel's mobile data services remained a key growth driver across the operations, and cyber security did well, as revenues grew on the back of last September’s Trustwave acquisition.

Underlying net profit for the quarter was up 7% while net profit — compared with "exceptional profit" in the previous year was stable at S$944 million and would have risen 2% in constant currency terms.

Singtel says operating revenue for the quarter fell 7% and in constant currency fell 6%, due to mandated cuts to mobile termination rates in Australia and, excluding the impact of the rate reduction, operating revenue dipped 1% in constant currency terms.

“The recurring theme across all our markets is mobile data. Having invested extensively in 3G and 4G networks and services and with the rise of smartphone adoption, our associates were well-positioned to successfully drive data usage and customer growth," Koong said.

"Across Singapore and Australia, our quality networks, differentiated content and flexible data pricing plans also helped us stand out from competitors.”

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Peter Dinham

Peter Dinham - retired and is a "volunteer" writer for iTWire. He is a veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).

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