Australian telco market value eroding: Optus

Optus CEO Paul O'Sullivan has blamed an erosion in the value of the Australian telecommunications market for the company's declining results.

Optus CEO Paul O'Sullivan has said that Optus' results, in conjunction with those of Vodafone and Telstra , show that the Australian telecommunications market is eroding.

Optus today reported a Q1 net profit of AU$155 million, down 3.9 per cent compared to the same quarter in 2011. Operating revenue was down 3.2 per cent, and mobile operating revenue dropped 4.2 per cent. A 2.2 per cent decline on mobile service revenue was blamed on the government reducing the cost of mobile-termination rates.

The company added 88,000 new post-paid mobile customers in the quarter, but dropped 65,000 prepaid customers due to a reduction in prepaid subsidies. Optus now has just over 9.5 million customers, including 6.8 million 3G customers. Vodafone has 6.8 million mobile customers in total, while Telstra boasts 13.8 million mobile customers.

O'Sullivan said that Optus' results, in line with Vodafone's and Telstra's results, show a pattern in the Australian telecommunications industry.

"Over the last three weeks, we've seen the results of our two major competitors in Australia. These confirmed our common thoughts that the Australian telecoms industry is clearly experiencing a period of significant value erosion," he told journalists today. "Industry profitability has significantly declined over the last two years, and it is clear from those results, in the industry, mobile service revenue is ex-growth."

Vodafone reported a loss of AU$260 million for the first half of 2012. However, Telstra has seen growth, reporting a full-year profit of AU$3.4 billion, up 5.4 per cent on the last financial year, including 8.5 per cent growth in mobile revenue.

Vodafone CEO Bill Morrow has previously indicated that he would like the government to step in and regulate the mobile telecommunications industry to ensure that Telstra does not have an unfair advantage, and O'Sullivan said today that the competition regulator should keep an eye on the industry.

"Clearly, at a time when there has been value disruption by the major player in the industry, I think it would be worthwhile for the ACCC [Australian Competition and Consumer Commission] and others to keep an eye on pricing movements in the industry, and ensure that competition is being maintained."

In order to combat the eroding market, O'Sullivan said that Optus will continue reinvigorating its brand, upgrading and maintaining its network to cope with demand and maintaining sustainable growth. It has also continued its restructure , which splits the company into three groups: a consumer group, a digital life group and an ICT group. This has led to a reduction in staff.

Between March and June, Optus shed 475 staff, going from 9699 staff members to 9504. Chief executive officer of Consumer Australia Kevin Russell said that that the company will shed 750 staff in total , but added that this has been mostly completed.

"We're largely through the process, but there will be some changes later in the year. In terms of where the changes have taken place, it has been across the organisation," he said.

In addition to reducing the headcount to decrease costs, by reducing subscriber acquisition costs and mobile subsidies, Optus' costs are down 3 per cent for the quarter.


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