Optus profit up by AU$60m for the year

Optus has published its results for the 2015-16 financial year, reporting net profit of AU$901 million, up 7.1 percent from the AU$841 million recorded for FY15.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) was AU$2.77 billion, up 5.6 percent from last year's AU$2.62 billion.

Operating revenue was AU$9.12 billion, up 3.7 percent from AU$8.79 billion, while free cash flow was AU$617 million, down 36.8 percent from last year's AU$976 million.

"The strong results which Optus has reported over the last year reinforces that our focus on providing convergent mobile, fixed, and multimedia services, combined with our innovative offers, is gaining traction with Australians," Optus CEO Allen Lew said in a statement.

"We are well on track to achieve our three-year targets, which will see us transform our core business by investing in mobile networks and content services."

In terms of quarterly results, Optus' net profit was AU$247 million, up 3.5 percent from the AU$239 million reported at the end of December; EBITDA was AU$739 million, up 2.3 percent from AU$723 million; and operating revenue was down by 9.3 percent, from AU$2.29 billion to AU$2.07 billion.

Free cash flow for the quarter was AU$358 million, down 11.6 percent from AU$405 million.

Optus attributed its quarterly fall in operating revenue to the decision by the Australian Competition and Consumer Commission (ACCC) in August to reduce charges for mobile termination rates as of January 1.

The rate to be charged for calls was cut by more than half, from 3.6 cents per minute down to 1.7 cents, with the ACCC saying that it had based its decision on comparative charges around the world as well as the incoming use of voice-over-LTE technology -- which Optus launched earlier this week.

Optus' consumer business had an EBITDA of AU$2.46 billion, up 6.1 percent year on year from AU$2.32 billion, on operating revenue of AU$7.53 billion, up 4.2 percent. Operating expenditure for consumer was AU$5.16 billion, 3.4 percent more than the AU$4.99 billion reported at the end of March last year. Its quarterly results saw a 3.5 percent rise in EBITDA, a 9.7 percent fall in operating revenue, and 16.4 percent less spent on opex.

A breakdown of Optus' yearly consumer revenue saw mobile contribute AU$5.71 billion, up 4.7 percent from last year's AU$5.45 billion; voice add AU$415 million, down 8.4 percent from AU$453 million; broadband contribute AU$502 million, down 3.8 percent for the year from AU$522 million; and pay TV provide AU$95 million, up 23.3 percent from AU$77 million.

Its total wholesale fixed services business was down by 1.1 percent for the year, to AU$649 million. Of this revenue, AU$236 million was from data and IP, AU$130 million was from voice, and AU$283 million came from satellite.

Optus' enterprise business contributed AU$301 million in EBITDA, up slightly year on year from AU$300 million, on operating revenue of AU$1.57 billion for the year, up 2 percent from AU$1.54 billion. Of this, ICT and managed services contributed AU$607 million for the year, up 11.4 percent; data and IP added AU$333 million, down 9.1 percent due to the migration of legacy data services to IP-based data solutions; voice provided AU$346 million, down 0.3 percent due to the transition to lower-cost, IP-based voice services; and mobile provided AU$289 million, up by 1.3 percent.

Quarterly results for enterprise were AU$76 million in EBITDA, down 8.5 percent, and AU$382 million in operating revenue, down by 6.9 percent quarter on quarter.

For enterprise fixed services, 18,339 buildings were connected to Optus as of the end of March, 108 more than last year.

Optus made AU$6.01 billion total in mobile revenue for the year, up 4.5 percent from AU$5.75 billion. As of the end of March, it has 3.68 million prepaid subscribers, having lost 14,000 over the year but gained 17,000 over the quarter; 4.66 million post-paid subscribers, gaining 45,000 over the year but losing 24,000 over the quarter; and 993,000 mobile broadband -- data-only SIMs for customers on prepaid and post-paid -- subscribers, with the telco losing 126,000 over the year and 26,000 over the quarter.

4G subscribers now number 4.68 million, with Optus adding 1.15 million over the year and 231,000 over the quarter. Its 4G footprint now reaches 94 percent of the Australian population, with 3,714 of its 4,850 4G sites having been upgraded to 700MHz spectrum as of April 30.

Average revenue per user (ARPU) on a monthly basis was AU$26 for prepaid services, down by AU$1 year on year; AU$58 for post-paid customers, down by $2 over the year; and AU$23 for mobile broadband, up by $1 over the year. Losses in ARPU were also attributed to the ACCC price slash, with Optus CFO Murray King calling it the "predominant cause".

Optus' mobile market share was not disclosed.

Optus now has 433,000 hybrid fibre-coaxial (HFC) broadband customers, 6,000 more than a year ago; 475,000 unconditioned local loop (ULL) broadband customers, 49,000 less than last year; 24,000 business-grade broadband customer, 4,000 fewer than last year; and 113,000 off-net National Broadband Network (NBN) customers, 77,000 more than last year, for a total internet customer base of 1.071 million -- 5,961 more than last year.

ARPU for mass market fixed broadband stayed at AU$53, stable year on year.

The telco also has 454,000 HFC telephony customers, 15,000 less than last year; 448,000 ULL telephony customers, 31,000 less than last year; and 110,000 off-net NBN telephony customers, 78,000 more than a year ago. ARPU for mass market fixed voice is AU$36, AU$4 lower than a year ago.

Staff costs were SG$1.099 million (AU$1.095 million) for the year, down 8 percent -- a figure likely to continue falling due to a restructure of its Enterprise and Consumer divisions announced last month, with a series of redundancies allowing a "reshape" of its workforce planned in order to support its transformation into a multimedia company rather than a pure telecommunications carrier.

Under the restructure, Optus will consolidate and make redundant a number of jobs, with a company spokesperson telling ZDNet that depending on "redeployment opportunities", the upper limit on the total jobs to go would be 480, although the chief executive on Thursday would not be drawn on the definite number of jobs going.

The net expense from Optus' legal disputes for the quarter was SG$26 million (AU$25.9 million). Optus is currently in court over a dispute between the ACCC and Telstra over the regulator's wholesale fixed-line pricing decision, as well as for the piracy website-blocking cases with Foxtel and Roadshow and various music studios.

Into the next year, Optus expects its revenue to improve off the back of transitioning from a pure telco in a multimedia company, including through its exclusive broadcast rights to the English Premier League (EPL) for the next three seasons, its deals with the Olympic and Paralympic committees, and its FIFA World Cup broadcasting sub-licence.

"We're creating a point of difference to our competitors ... we have evolved into a mobile-led entertainment brand," Lew said during the financial results call on Thursday morning.

In regards to the EPL, which Lew said it will begin selling packages for in June, Optus had previously said that it would be broadcast via its Optus TV platform on the Fetch set-top box, as well as through apps, a website, and a satellite service for more remote viewers.

On Thursday, Lew announced that the EPL can also be streamed through Apple TV.

"It will be on Apple TV. We have signed that agreement, and it will be available on Apple TV by the time the first game of the season comes on in August," Lew confirmed.

"If you already have an Apple TV set-top box, or if you are already accessing entertainment through an internet portal or a mobile app, you don't need to buy a [Fetch TV] set-top box."

Optus' parent company Singtel reported a net profit of SG$3.87 billion on EBITDA of SG$5.01 billion and operating revenue of SG$16.96 billion for the 2016 financial year.