TPG and iiNet are neck and neck in terms of customer numbers, battling it out for the position of third largest provider. Will the company that comes out on top with the most customers be the ultimate winner, or will other factors come into play?
With the NBN expected in the (let's be optimistic) not too distant future, both companies will be keen to grab as many subscribers as they can before the new wholesale network levels the playing field at the expense of companies that have invested heavily in their own infrastructure.
But will their revenues grow alongside customer numbers? Their share prices, which have sky-rocketed over the last year, indicate that investors think so. I think there might be a degree of optimism here. People expect the cost of internet access to continually slide, so to feed the hunger for revenue growth both ISPs need to keep acquiring customers, or offer new services and value that will enable them to maintain revenue per customer.
And growth in customer numbers is by no means a given. Barriers for growth in this second tier of ISPs are all too possible, with politics, as usual having its part to play.
Ultimately, of course, it's profit that counts. I'm sure either company would be happy to be fourth place in customer numbers if they assumed third place in earnings before interest, tax, depreciation and amortisation.
To do that costs need to be kept down, an area in which TPG seems to have a sharper focus. Outsourcing its call centre is a prime example. If that's resulting in poor service it doesn't seem to show in the company's churn rates. So low costs and low prices, will the race be won as simply as that?
In this edition of Twisted Wire you'll hear from:
- Guy Cranswick, advisor, IBRS
- Emilie Ditton, senior analyst at Telsyte
- David Cannon, program manager, Telecommunications at IDC
What do you think? Are customer numbers the end game?