Amaysim considers leaving broadband as overall profit drops 76 percent

A majority of Amaysim's FY18 revenue came from its new energy business, with the company considering leaving the NBN sector due to high costs and higher churn than expected.
Written by Corinne Reichert, Contributor

Amaysim has said it is conducting a review of whether to exit the broadband sector in Australia, citing higher customer churn than expected, in addition to "unsustainable wholesale costs" being imposed by the National Broadband Network (NBN) company.

For the year to June 30, Amaysim recorded net profit of AU$2.7 million, down 76 percent from last year's AU$11.5 million, despite net revenue rising by 76.8 percent to AU$577.6 million.

Earnings before interests, tax, depreciation, and amortisation (EBITDA) reached AU$37.6 million, up 11 percent -- AU$23.4 million from mobile, AU$20.4 million from energy, and negative AU$6.3 million from broadband.

As of June 30, Amaysim had 1.158 million mobile subscribers, adding 84,000 during the year; 191,000 energy customers after adding 26,000 during FY18; and 15,000 broadband customers, up 196 percent from 5,000 last year.

Average revenue per user (ARPU) across its mobile customers dropped by 20 percent, down to just AU$17.87 per month, while energy ARPU rose to AU$142.96 per month and broadband ARPU rose to AU$60.97.

Just 1 percent of revenue came from broadband, at AU$8.6 million, with 45 percent from mobile and 54 percent from energy, at AU$241.5 million and AU$310 million, respectively. Mobile revenue decreased by AU$37 million in comparison to last year, which Amaysim attributed to both a reduction in ARPU and increasing competition.

"Amaysim is no longer just a telco; we are an asset-light utilities provider," said Peter O'Connell, who was appointed as CEO of Amaysim last month following the departure of Julian Ogrin for Foxtel.

"Our diversification into energy has enabled Amaysim to deliver growth despite a challenging mobile market. The early success of Amaysim energy reinforces our belief that our cross-sell offering will differentiate the company in a crowded telco market."

By comparison to mobile and energy, broadband is capital intensive and competitive, Amaysim said.

"The board has determined that it is in the interests of shareholders to review the broadband business and to discontinue selling devices in the first half of the 2019 financial year," the carrier said.

"These decisions are expected to enable the company to redirect capital to the mobile and energy businesses that have higher growth and returns. The company will provide an update on the review of the broadband business at the upcoming Annual General Meeting."

The chief executive added that Amaysim is eyeing 5G in mobile.

"While competition in mobile will remain intense in FY19, we are still confident about the sector over the medium to long term. We continue to achieve strong mobile subscriber growth in July 2018, and expect the rollout of 4.5G and 5G networks in Australia over FY19 and FY20 to provide increased rationality and a slowing of competitive excess," O'Connell said.

O'Connell also referred to the regulator's investigation into Amaysim's energy offering, as well as the current political debate over the National Energy Guarantee, which caused last week's leadership squabble.

"In energy, we will closely monitor the government's response to the ACCC enquiry into the sector and finalisation of the National Energy Guarantee, participating in industry consultations where we get the opportunity to do so. We agree with the ACCC's recommendations and the overall theme that the whole sector requires fixing," he said.

The Australian Competition and Consumer Commission (ACCC) had last month kicked off legal proceedings against Amaysim in Federal Court, claiming false and misleading marketing claims concerning discounts on its energy brand.

According to the ACCC, Amaysim's Click Energy breached Australian Consumer Law by representing to Victorian and Queensland customers between October 2017 -- when it launched services -- and March 2018 that they would be able to obtain discounts of between 7 percent and 29 percent by paying their bills on time.

However, these discounts were false or misleading because they applied to the company's variable market offer rates, which were higher than its standing offer rates, the ACCC alleges.

The misrepresentations about savings consisted of Click Energy telling consumers they would save a certain amount by switching to the provider. According to the ACCC, Click Energy had "no proper basis for these representations".

"When compared with Click Energy's standing offer rates, the discounts were much lower than advertised. In some cases, there was no discount at all," ACCC Chair Rod Sims said.

Amaysim had announced its AU$120 million acquisition of Click Energy in April 2017, which it said was part of its long-term strategy to become the "remote control for the smart home".

At the time, Ogrin told ZDNet that energy is the "most logical vertical" to complement the company's mobile and broadband products, and that the acquisition of Click reflects the telco's recognition of the opportunity for a "mobile virtual network operator (MNVO) of energy".

Amaysim had reported a first-half profit drop of 129 percent, while statutory EBITDA dropped by 41 percent to AU$10.2 million.

Revenue was up by 115 percent, however, totalling AU$294 million for the first half.

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