NBN payments lift Optus profitability for third quarter

Rather than suffering a 22% drop in EBITDA, Optus was able to report 10% growth thanks to payments from NBN.
Written by Chris Duckett, Contributor
Image: Optus

While the company responsible for deploying the National Broadband Network (NBN) constantly carries on about its telco payments being a drag on its profitability, the flip side is Optus received AU$233 million this quarter from NBN which lifted it into positive territory.

The Singtel-owned telco reported on Thursday that in the quarter to the end of 2019, its operating revenue was slightly down to AU$2.4 billion, with earnings before interest, tax, depreciation, and amortisation (EBITDA) up 6% to AU$700 million. Removing the NBN migration payments from the equation would have seen the telco suffer a 25% drop in EBITDA.

In net profit terms, Optus was down 24% year on year as it walked away with AU$131 million against AU$172 million a year prior.

Optus said its mobile revenue was down 8.6% due to lower demand for handsets after it reduced its handset subsidies. The telco added its new plan structure resulted in lower hardware sales, lower sales volume, and lower price competition.

As of December 31, the telco had 10.5 million mobile services made up of 3.5 million prepaid customers, down 1%, an almost 5% increase in postpaid customers to 5.8 million, and a 3.4% jump in mobile broadband subscribers to 1.2 million. Over the past year, overall monthly average revenue per user declined from AU$31 to AU$29.

In the consumer fixed market, the telco was able to add 254,000 customers in the year to December 31, thanks to Australians shifting across to the NBN.

During the quarter, Optus made its 5G fixed wireless service generally available and had more than 400 5G sites at the end of the quarter. It is targeting 1,000 sites by March.

Optus also spent AU$537 million in capital expenditure during this period and is looking to spend AU$1.3 billion for the year in total.

For its enterprise group, Optus saw a 14% decline in revenue to AU$298 million and a 54% drop in EBITDA to AU$22 million, which the telco said was impacted by new entrants reselling NBN services.

At the end of 2019, Optus employed just under 6,980 people, which is a headcount reduction of 4.7% compared to the same time last year.

The company added it had 825,000 active subscribers on its Optus Sport service.

"This has been a transitional quarter as we adjust to increasing customer demand for SIM-only plans," outgoing Optus CEO Allen Lew said.

"We achieved a major milestone in the quarter as we brought our 5G services for both home internet and mobile to the Australian market. Our 5G home internet service has achieved excellent customer feedback as it delivers an always-on and reliable super high-speed internet into the home."

Lew will soon be replaced as CEO by Kelly Bayer Rosmarin, while Lew returns to Singtel to be CEO of group strategy and business development.

At the end of last month, Optus was hit with Australia's biggest spamming fine.

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