Optus to rationalise retail as it invests in 4G network
OPTUS is investing heavily in its network capacity to catch up with Telstra and capitalise on the demands of data-hungry consumers.
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."
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free