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Amaysim profit plunges 96 percent on back of IPO, Vaya purchase

Amaysim's profits have fallen to a meagre AU$681,000 thanks to rising costs associated with network-related, IPO, and acquisition expenses, though its revenue and EBITDA are growing.

Telecommunications provider Amaysim has published its results for the first half of the 2016 financial year, revealing net profit of just AU$681,000, a drop of 96 percent year on year from the AU$17.1 million announced a year ago.

Amaysim attributed the profit plummet to network related expenses, as well as the costs associated with its AU$70 million acquisition of Vaya and initial public offering (IPO).

Revenue stood at AU$117.5 million, 18 percent higher than last year's AU$99.6 million, while earnings before interest, tax, depreciation, and amortisation (EBITDA) were AU$12.58 million, a growth of 173.5 percent.

Amaysim CEO and managing director Julian Ogrin said the results prove the company is "driving sustainable, profitable growth in a dynamic and competitive market".

Total expenses came in at AU$116.5 million, with network-related expenses amounting to AU$81.65 million of this; employee benefit expenses AU$9.96 million; IPO expenses AU$8.28 million; marketing expenses AU$6.44 million; depreciation and amortisation expenses AU$1.81 million; acquisition expenses AU$1.7 million; and other expenses AU$6.65 million.

The telco has net assets worth AU$11.13 million, a significant rise over last year's negative AU$2.6 million. Cash and cash equivalents stood at AU$16.6 million as of the end of December, a 182.2 percent rise from last year's AU$5.88 million.

Average revenue per user (ARPU) was AU$26.34, growing by 4.6 percent from the AU$25.17 reported in December 2014, which the company attributed to an increase of users in its Unlimited category.

"In late 2015, we launched our refreshed suite of Unlimited plans that focus on data as a key purchase influencer," Ogrin said.

"This range of 'one-decision' plans has been very positively received by the market. We also launched the 'amazingly simple' brand platform, a sophisticated marketing proposition. We've seen broad and sustained brand exposure and favourable response from our target market. Together, the innovative plans and a strong marketing campaign had a positive impact on subscriber growth."

Amaysim, which filed for its IPO in June last year, had 764,000 subscribers as of December, having gained 85,000 over the past year.

According to Ogrin, Vaya is integrating well with the Amaysim business.

"Vaya is a complementary brand that provides scale and support to the Amaysim group through expanded customer service and web development resources at its Philippines-based operations," Ogrin maintained.

Amaysim acquired mobile virtual network operator (MVNO) Vaya last month for a total of AU$70 million, to be paid by AU$5 million in cash, AU$15 million in Amaysim scrip, and assumption of Vaya's AU$50 million liability to Optus.

The scrip is subject to escrow arrangements and will be paid over a period of 12 months, while the cash will be paid on completion of the deal. The debt to Optus will be paid through use of existing cash reserves and Amaysim's future cash flow over the 24 months beginning February 2016.

Amaysim attributed the acquisition to wanting to reach the sub-AU$20 market through a dual-brand strategy. Amaysim will also be able to make use of Vaya's overseas contact centre.

"Vaya's online-only, strong market offering in the sub-AU$20 market segment complements Amaysim's 'customer champion' position, and creates greater scale to our online-driven platform and operating network," Ogrin said at the time.

"I am very happy that the acquisition will present immediate value for Amaysim shareholders. This is a rare opportunity to significantly grow our number of subscribers on the same network and in a complementary market segment."

While Vaya's customer base is forecast to continue growing, Amaysim noted that contributions to revenue from the Vaya business would only be "materially accretive" by FY17.

Vaya, which operates under the Vaya, Live Connected, and Zen Connect brands to resell Optus' 4G Plus network over mobile services and fixed-line broadband, has a customer base of approximately 140,000, with an ARPU of AU$22.

Its cheapest mobile plan offers unlimited text messages, AU$650 worth of calls, and 1.5GB of data for AU$18 per month, while its top-tier "unlimited" AU$44 plan grants unlimited calls and text messages, plus 6GB of data each month.

On Friday, market research company Kantar published market share statistics showing that Amaysim and other MVNOs -- including Vaya -- are experiencing growth at the expense of Vodafone Australia, Virgin, and TPG.

According to Kantar, as of the end of December, Amaysim had a total mobile market share of 3.9 percent, up 0.3 percentage points year on year; a post-paid market share of 1.3 percent; a 6.2 percent share in the prepaid mobile sector; and an 8.2 percent share in the no-contract market.

Other MVNOs had a total mobile market share of 9.1 percent, a growth of 1.8 percent; post-paid market share of 9 percent; prepaid market share of 6.6 percent; and the third-highest share of the no-contract segment, at 15.2 percent.

Earlier this month, the TIO reported in its quarterly Telecommunications Complaints in Context report [PDF] that Amaysim saw a 53.3 percent decrease in complaints year on year, from 1.5 per 10,000 services in operation, down to 0.7.

Vaya came under fire, however, in the TIO's Annual Report in October, which revealed that Vaya's complaints statistics had increased substantially. Over the year to June 30, 2015, Vaya saw its complaints increase by a whopping 288.4 percent, from 421 to 1,635, due to excess charges, disputed bills, and failed data usage notifications.

The MVNO noted that its customer base had increased by 174 percent over two years, which may have contributed to the increase in complaints.

In December, Vaya was also found by the Australian Communications and Media Authority (ACMA) to be non-compliant with the Telecommunications Consumer Protections (TCP) Code by charging customers a AU$20 security deposit before providing services.

On Thursday, incumbent telco Telstra announced a net profit of AU$2.13 billion on revenue of AU$13.68 billion for the first half of FY16, with growth attributed to bundling entertainment and offering more mobile data. EBITDA increased by 1.7 percent, to AU$5.41 billion.

Telstra added 235,000 domestic retail mobile customers, to bring its total up to 16.9 million. Telstra's ARPU for post-paid was AU$61.38, while prepaid ARPU was AU$21.20.

Optus last week announced a net profit of AU$227 million on revenues of AU$2.43 billion for the quarter ending December 31, due to growth in mobile and NBN. EBITDA was AU$685 million, up AU$33 million or 5.1 percent from the AU$652 million announced in December 2014.

Optus' post-paid mobile ARPU was AU$61, while prepaid ARPU was AU$28.

Vodafone is due to present its financial results on Monday next week.