Cost-cutting bolsters Optus profits
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."
Frequently Asked Questions about this Article…
Optus increased its profits by 33% to $218 million through strategic cost-cutting measures, such as reducing handset subsidies, streamlining distribution channels, and cutting staff, which offset the 5% fall in revenue.
Optus implemented several cost-cutting strategies, including reducing customer acquisition costs by lowering smartphone subsidies, cutting its retail footprint, and eliminating many re-sellers from its distribution channel.
Optus's My Plan is designed to provide customers with certainty over their data usage costs, helping them avoid unexpected charges. This plan has attracted 360,000 new customers who use significantly more data than other customers.
Optus plans to achieve profitable revenue growth by improving customer service, investing in its network, and focusing on increasing revenue per user through higher data usage, all while maintaining a sustainable value proposition.
The decline in revenue had little effect on Optus's bottom line because the majority of the revenue decline was from areas that did not generate profit, allowing the company to focus on more profitable segments.
Optus is addressing customer pain points by eliminating issues related to roaming, breakage, and credit card fees, aiming to enhance the overall customer experience without relying on aggressive price-led strategies.
Data usage plays a central role in Optus's strategy, as the company aims to increase revenue per user by encouraging more data usage through plans like My Plan, which offers customers predictable costs.
According to Kevin Russell, Optus's long-term strategy involves a three-pronged approach: cost-cutting, improving customer service, and investing in the network to drive profitable revenue growth over the next 18 months.
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