Optus to rationalise retail as it invests in 4G network
It also outlined plans to overhaul its retail footprint, including cutting ties with distributors Telechoice and Allphones, as part of a strategy to bring 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 added only 53,000 new customers in the past six months, while Telstra said last week it had attracted more than 600,000 customers in that period - about half of them 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. Demand for 4G services is expected to grow exponentially. "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," the chief executive of Optus, Kevin Russell, told BusinessDay.
Mr Russell said there had to be more transparency in pricing to "enable customers to use data without fear of bill shock".
Optus's 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 ending December 31.
Earlier on Thursday, SingTel reported an 8.3 per cent drop in December-quarter profits to $S827 million ($646.1 million), partly weighed by Optus.
Analysts said it would be harder for telcos such as Optus to secure growth on new sales given the Australian 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 a Deutsche Bank analyst, Vikas Gour.
The mobile division contributed $1.5 billion towards Optus's total revenue of $2.3 billion during the quarter. The company maintained its profit margin, which rose from 23.2 to 25.2 per cent.
In shaking up Optus's retail footprint, Mr Russell said there was room for rationalisation. "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 investing heavily to upgrade its 3G and 4G network capacity — spending $176 million on those upgrades in the past quarter, about two‑thirds of its total capital expenditure. Management says building a strong 4G network is critical as the market becomes a "battleground" for faster mobile data, so investors should watch network investment as a driver of future customer competitiveness and revenue mix.
The company spent $176 million upgrading its 3G and 4G mobile networks in the past quarter. That amount was about 41% higher than the same period last year and represented roughly two‑thirds of Optus's total capex for the quarter.
Optus added 53,000 new customers in the past six months, while Telstra reported attracting more than 600,000 customers over the same period — around half of Telstra's gains were new 4G customers. This contrast highlights competitive pressure in acquiring 4G subscribers.
Optus plans to bring more sales in‑house as part of a strategy to focus on branded retail and online channels. Management believes there's room to rationalise distribution in the market and wants to centre its core services strategy around Optus‑branded stores and digital sales, which is why it is ending relationships with distributors such as Telechoice and Allphones.
Optus's profit fell 9.2% in the fourth quarter year‑on‑year, with a reported net profit of $160 million for the three months ended December 31. The mobile division contributed $1.5 billion to total quarterly revenue of $2.3 billion, and the company maintained its profit margin, which rose from 23.2% to 25.2%.
SingTel reported an 8.3% drop in December‑quarter profits to S$827 million (about US$646.1 million), with results partly weighed down by Optus. Investors in SingTel should therefore consider Optus's performance when assessing the group's earnings.
CEO Kevin Russell said the next two to three years will be a battleground for 4G, and Optus will "go hard" to roll out its network and offer a strong 4G customer proposition. He also called for more transparency in pricing so customers can use data without fear of bill shock — a signal that Optus may focus on clearer data plans as part of its strategy.
Analysts note the Australian mobile market is becoming saturated. Deutsche Bank analyst Vikas Gour expects mobile subscriber base growth to slow to 3.4% in financial year 2013, down from 6.9% in 2011 and 5.7% in 2012, suggesting it will be harder for telcos like Optus to secure growth from new sales alone.
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