Optus spends up in Telstra chase
The telco also outlined plans to overhaul its retail footprint, including cutting ties with distributors Telechoice and Allphones as part of its strategy of bringing sales back in-house.
The mobile carrier spent $176 million upgrading its 3G and 4G mobile networks, about two-thirds of its total capital expenditure in the past quarter. This was 41 per cent more than the same period last year.
Even so, the Singapore Telecommunications-backed Optus only added 53,000 new customers in the past six months while Telstra last week said it had attracted more than 600,000 customers in the same period - about half of which were new 4G customers.
Super-fast 4G networks are the new battleground for telcos as they try to take advantage of the growing demand for speed and data use. Demand for 4G services is expected to grow quickly.
"We see the market over the next two to three years as being a battleground in 4G. So we will absolutely go hard to roll out our network and have a strong 4G customer proposition in the market," Optus chief executive Kevin Russell told BusinessDay.
Optus' renewed push into building and upgrading its network comes at a time when its profit fell 9.2 per cent in the fourth quarter compared with the same period last year.
The company posted a net profit of $160 million in the three months to December 31.
Earlier on Thursday, SingTel reported a 8.3 per cent drop in December-quarter profit to $S827 million ($A646.1 million), partly affected by Optus. Analysts said it would be harder for telcos such as Optus to secure growth on new sales given the Australia mobile market is saturated.
"We expect the mobile market subscriber base growth to slow to 3.4 per cent in financial year 2013 after growing at 6.9 per cent in 2011 and 5.7 per cent in 2012," said Deutsche Bank analyst Vikas Gour.
The mobile division contributed $1.5 billion towards Optus' total revenue of $2.3 billion during the quarter.
Although total revenue dropped 5.7 per cent, the company was able to maintain its profit margin, which increased from 23.2 per cent to 25.2 per cent.
In shaking up Optus' retail footprint, Mr Russell said, there was room for rationalisation.
"We think there is too much retail distribution in the marketplace," he said.
"We believe there is room for rationalising distribution in the marketplace and centre our core services strategy around branded retail and online."
Frequently Asked Questions about this Article…
Optus is spending heavily on network capacity—particularly upgrading its 3G and 4G networks—to compete with Telstra and meet growing demand for mobile data. For investors, this signals the company is prioritising long-term competitiveness in the fast-growing 4G market, but it also means higher capital expenditure now that could weigh on short-term profits.
In the past quarter Optus spent $176 million upgrading its 3G and 4G networks, which was about two-thirds of its total capital expenditure for the quarter and 41% more than in the same period last year. This shows a significant shift of capex toward network improvements.
Optus added 53,000 new customers in the past six months, while Telstra attracted more than 600,000 customers in the same period (about half of which were new 4G customers). That gap suggests Optus is investing to gain share, but customer growth is currently much stronger at Telstra.
Optus' profit fell 9.2% in the fourth quarter year‑on‑year, with a net profit of $160 million for the three months to December 31. Total revenue for the quarter was $2.3 billion, down 5.7%, but the company maintained and even improved its profit margin from 23.2% to 25.2%.
The mobile division contributed $1.5 billion to Optus' total quarterly revenue of $2.3 billion, making it a major revenue driver for the company and a key focus for its network investments.
Optus is overhauling its retail footprint by bringing more sales in‑house and cutting ties with distributors such as Telechoice and Allphones. The company believes there is too much retail distribution and plans to rationalise, focusing on branded retail and online channels—an approach that could reduce distribution costs over time but may involve short‑term restructuring costs.
Yes. SingTel reported an 8.3% drop in December‑quarter profit to S$827 million (A$646.1 million), and analysts noted this result was partly affected by Optus. That means Optus’ performance can have a material impact on SingTel's consolidated results.
Deutsche Bank analyst Vikas Gour said mobile subscriber growth in Australia is expected to slow to about 3.4% in FY2013 after previous years of faster growth, reflecting a more saturated market. For investors, that implies telcos may compete more on network quality, pricing and retention than on attracting large numbers of new subscribers, making investments in network upgrades and distribution strategy critical.
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