Vocus signs on for Telstra fixed-line, Optus mobile services

Vocus Communications has announced that Telstra will continue supplying its fixed voice and broadband services to its Commander, Dodo, and iPrimus brands, while Optus will supply wholesale mobile voice and mobile broadband.

"We are pleased to build upon our long-standing relationship with Telstra Wholesale, ensuring a strong ongoing competitive market position for our key retail brands," Vocus CEO Geoff Horth said on Monday morning.

Vocus, which merged with M2 Group in February to form the third-largest telecommunications provider in New Zealand and the fourth-largest in Australia worth more than AU$3 billion, extended its own existing agreement with Telstra while extending M2's 11-year partnership with Optus.

Both contracts -- the values of which were cited by the companies involved as being confidential -- bring the agreements out until mid-2019, after they were due to expire halfway through 2016.

"We are pleased to have concluded this tender process, and to be extending our long-standing relationship with Optus," Horth added.

"We look forward to delivering growth in our mobile portfolio on the back of this new partnership."

Optus Wholesale managing director Rob Parcell welcomed its Vocus contract win, saying it will extend the telco's services in both consumer and enterprise sectors.

"It's a rejuvenation of our relationship, and we are looking forward to further evolving and developing our relationship with Vocus," Parcell said.

"We have consistently invested in our network, with more than AU$1 billion annually over the past 10 years. It is through these investments we are delivering coverage depth and breadth across metropolitan and regional locations nationally, particularly in the mobile space."

Optus' 4G mobile network reaches 92 percent of the population as of January this year, but it claims 100 percent overall mobile reach thanks to its satellite service.

It also plans to boost its 4G network in regional and remote areas through its 1800MHz spectrum auction win, having spent AU$196 million on the high-band spectrum.

"When combined with our existing assets, this additional spectrum allows Optus to support Australia's growing demand for data services in regional Australia," Optus CEO Allen Lew said.

"Giving more retail and business customers access to super-fast 4G in more places underpins our strategy to be a mobile-led entertainment company. The use of common frequencies between metropolitan and regional areas will help reduce dead zones across urban and rural boundaries, and give customers a seamless 4G experience when they're on the go."

While Optus in February reported a AU$1.24 billion mobile service revenue, up 1 percent year on year, it did lose 26,000 mobile post-paid handset customers over the quarter due to "the deactivation of a wholesale customer" -- likely TPG, which took its mobile customers over to the Vodafone Australia network following a AU$1 billion deal also involving an agreement to build out dark fibre.

However, Optus gained 61,000 prepaid handset customers over the quarter, with total 4G customers up 314,000 quarter on quarter, to 4.45 million. Its 4G mobile services have a 47 percent penetration rate.

Telstra, meanwhile, has the most extensive fixed-line network in the country, leveraging its legacy copper, hybrid fibre-coaxial (HFC), and fibre network assets to deliver broadband through wholesale customers.

Its coverage is so ubiquitous that Optus chairman Paul O'Sullivan recently demanded a government inquiry investigate fixed-broadband competition as well as the instatement of a new independent referee to evaluate separating Telstra from its copper network.

However, Telstra's inter-carrier services revenue declined by 5.2 percent over the six months to December 2015 due to a decision made by the Australian Competition and Consumer Commission (ACCC) to cut the prices it can charge its wholesale customers for use of its copper network during the transition to the National Broadband Network (NBN) by 9.4 percent.

The decision cost Telstra AU$16 million in total earnings before interest, tax, depreciation, and amortisation (EBITDA), according to CFO Warwick Bray, with Telstra in the midst of a Federal Court case against Optus, the ACCC, and TPG on the matter.

Despite this, Telstra added 121,000 retail fixed broadband customers over the six-month period, bringing its total to 3.3 million. Fixed voice customers numbered 5.9 million.

Vocus itself reported a first-half FY16 net profit of AU$27.37 million, up 202.5 percent year on year, on revenue of AU$176.28 million and EBITDA of AU$62.25 million, partially due to its AU$1.2 billion Amcom acquisition in June last year.