Telstra told to steal Optus' iPhone users

Summary:Telstra should focus on stealing Optus' first-generation iPhone customers as their 24-month contracts expire in 2010, a report by Goldman Sachs has recommended.

Telstra should focus on stealing Optus' first-generation iPhone customers as their 24-month contracts expire in 2010, a report by Goldman Sachs has recommended.

The report analysing Telstra's mobile strategy stated that the telco's penetration into the smartphone market was low compared to its competitors, with Telstra's market share accounting for 33 per cent, while Optus had 39 per cent and Vodafone Hutchison Australia had 28 per cent. The report identified that Optus has the highest post-paid market share at 50 per cent, and with many customers coming off their 2008 iPhone 3G contracts, they would be ripe for Telstra's picking.

"The arrival of the iPhone 3G in July 2008 drove a significant acceleration in the handset replacement cycle across the industry. With these customers now rolling off 24-month contacts, the number of subscribers 'up for grabs' has increased significantly," the report said. "Our analysis indicates that all operators have an increasing proportion of their sub base 'at risk'."

About a million customers would be coming off the two-year contracts, according to the report.

"However, Optus is likely to be the most vulnerable given it has by far the biggest share of the installed base of iPhones in Australia."

Around the time the phone was first released in 2008, Optus had also been experiencing some network issues, which could affect Optus iPhone customers' likelihood to churn.

The report said that acquiring new customers would be of more value in the long run for the telco than just re-contracting its existing smartphone customers.

"While the acquisition of new customers delivers incremental revenue to Telstra, the re-contracting of existing customers (at a similar cost per subscriber) is unlikely to deliver incremental revenue. In fact, given Telstra's aggressive product re-pricing, re-contracting existing subscribers is likely to deliver lower incremental revenue," the report said.

"Thus, as long as customers out of contract do not churn, Telstra would clearly prefer to spend a greater proportion of its investment on acquiring new customers."

Goldman Sachs said that the flood of smartphone devices such as HTC and other Android devices would work in Telstra's favour and added that the telco's main advantage would be the strength of its Next G network over its rivals' 3G networks.

"Although both Optus and Vodafone are investing heavily in their networks to close the gap, we believe Telstra continues to hold a significant network competitive advantage. In our view, this will become increasingly important in a smartphone world as customers are likely to be more sensitive to network performance."

Topics: Apple, iPhone, Mobility, Telcos


Armed with a degree in Computer Science and a Masters in Journalism, Josh keeps a close eye on the telecommunications industry, the National Broadband Network, and all the goings on in government IT.

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