Cost-cutting bolsters Optus profits

Second-quarter profits at Optus rose 33 per cent to $218 million despite a 5 per cent fall in revenue.
By · 15 Nov 2013
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15 Nov 2013
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Second-quarter profits at Optus rose 33 per cent to $218 million despite a 5 per cent fall in revenue.

The second-largest mobile operator in the country scaled back its subsidies on handsets, streamlined distribution channels and reduced the number of staff.

"It [the result] is absolutely as a result of cost efficiencies," Kevin Russell, chief of Optus's Australian operations, said.

One of the biggest cost reductions was the decline in customer acquisition costs, essentially the size of subsidies for smartphones. Optus also reduced its retail footprint, cutting many re-sellers from its distribution channel.

The company slashed more than $200 million in expenses in the quarter ended September 30.

Mr Russell said the cost-cutting was the first leg of his three-prong strategy to revive Optus. Improving customer service and investing in the network would eventually translate into profitable revenue growth in the next 18 months.

He said the decline in revenue had little effect on the company's bottom line. "The vast majority of that revenue decline [5 per cent] related to revenue that didn't generate any profit," he said.

"We want to get more revenue per user [from more data usage]. We do expect to be able to build our customer base up on the back of having a good and sustainable value proposition."

Central to the company's strategy is My Plan, which is designed to give customers certainty over how much they will pay for their data usage.

Optus signed up 360,000 new My Plan customers in the past four months and they used "markedly" more data than other customers.

"We are aggressively taking bold decisions to remove customer pain points, whether it is roaming, whether it is breakage or credit card fees," Mr Russell said. "We don't want to pursue an aggressive price-led strategy with subsidies."
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