Mobile headwinds shake Optus profits
Revenue in the last quarter ending March 31 was down 5.4 per cent to $2.17 billion and for the year was down 4.6 per cent.
The poor performance by Optus also dragged down the revenue of its parent company, SingTel, by as much as 6.3 per cent in the past quarter.
Optus chief executive Kevin Russell said the telco was facing strong headwinds in the mobile industry, where the growth of new customers has slowed markedly. "The net growth in the market, in terms of new customers, is dramatically less than what it was 12 months ago," Mr Russell said. "[The] overall industry has gone significantly backward in terms of mobile service revenues."
Optus added 33,000 new customers in the past three months and 103,000 customers in the past year.
While Optus struggled to attract new mobile users, rival Telstra bucked the industry trend and added more than 600,000 customers in the past three months.
Mr Russell said Telstra was able to defy the trend at the expense of Vodafone, the country's third-largest carrier.
"Vodafone has definitely had its challenges and Telstra has unquestionably capitalised on those challenges on the perception of its strong network," he said.
Mr Russell said its 4G network in metropolitan centres would be as good as any in the market in two to three years.
Mr Russell said the company was positioning itself to capitalise on mobile data revenue growth. Data revenue accounts for 53 per cent of Optus' service revenue, according to its financial report.
"Revenues on data will be driven by 4G," he said. "We want to steadily increase our penetration of 4G handsets ... and also to get right rates plan structure."
It is believed the major telcos are developing pricing plans to charge more for data usage in the coming months as they introduce their 4G networks, which will enable much faster download speeds.
Optus made a net profit of $257 million in the three months to the end of March, down from $267 million in the previous corresponding period. The year's profit of $728 million was down from $787 million in the previous 12 months.
Revenue declines were driven by pressures across three key business units - mobile, wholesale fixed-line and fixed-line services for consumer and small business. Revenue for the mobile division, Optus' largest revenue earner by far, declined by 7.3 per cent.
Mr Russell revealed Optus had 785,000 devices on its 4G network. Telstra has more than 2 million connected to its 4G network.
Frequently Asked Questions about this Article…
Optus reported a 7.5% fall in annual profit to $728 million, driven largely by declining mobile income. For everyday investors, falling profits can signal revenue pressure in the business and may affect shareholder returns and parent-company performance (SingTel was also dragged down).
Revenue for the quarter ending March 31 fell 5.4% to $2.17 billion, and revenue for the year was down 4.6%. The declines were mainly caused by weaker mobile income and pressures across key business units.
Revenue declines were driven by three key units: mobile, wholesale fixed-line, and fixed-line services for consumer and small business. The mobile division, Optus' largest revenue earner, declined by 7.3%.
Optus added 33,000 new customers in the past three months and 103,000 in the past year. By contrast, Telstra added more than 600,000 customers in the past three months — a gain Optus' CEO said Telstra won partly at the expense of Vodafone, which has faced challenges.
Optus' poor performance contributed to a drop in SingTel's revenue — SingTel revenue was down by as much as 6.3% in the past quarter, according to the article.
Optus is positioning to capitalise on mobile data growth: data already accounts for 53% of its service revenue, the company wants to increase 4G handset penetration, and it expects its metropolitan 4G network to be as good as any in two to three years. Management says data revenues will be driven by 4G and telcos are likely to roll out new pricing plans to charge more for data as faster 4G services expand.
Optus reported a net profit of $257 million in the three months to the end of March, down from $267 million in the previous corresponding period. For the full year the profit was $728 million, down from $787 million in the prior 12 months.
Optus had 785,000 devices on its 4G network, while Telstra had more than 2 million connected to its 4G network. For investors, higher 4G device adoption can translate into stronger data usage and revenue potential, so disparities in 4G penetration are relevant when assessing growth prospects in mobile data.
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