Optus to invest AU$1.5b in mobile network

Thanks to the ACCC's decision not to declare wholesale mobile domestic roaming, Optus has said it will invest AU$1.5 billion in its mobile network over the next year, particularly in regional areas.
Written by Corinne Reichert, Contributor

Optus has announced that it will be investing AU$1.5 billion in improving its mobile telecommunications coverage throughout Australia, attributing the investment to the government's decision not to declare wholesale domestic mobile roaming.

"This decision will provide Optus with the certainty it needs to invest a further AU$1.5 billion in 2017-18 to deepen network capacity and coverage, and continue delivering high-quality services, choice, and competition, particularly in regional Australia," Optus CEO Allen Lew said.

Lew told ZDNet that Optus' goal in investing further in its network is to become the number one network for voice and data in Australia.

"The AU$1.5 billion primarily will go towards our mobile network, and will go towards building a significant number of new greenfields sites primarily in the regional areas," Lew told ZDNet.

"There will also be within that AU$1.5 billion a densification of our metro networks in the capital cities."

Optus also invested AU$1.5 billion in capital expenditure during the 2016-17 financial year, expanding its 4G network to reach 96.1 percent of the Australian population and further improving coverage and services by deploying 4.5G services, small cells, and voice over Wi-Fi.

Due to the Australian Competition and Consumer Commission (ACCC) decision not to declare wholesale domestic mobile roaming -- which would have allowed Vodafone to piggyback off Telstra and Optus infrastructure rather than investing in its own -- Optus said it would invest the same amount again.

Optus' decision followed Telstra making the same commitment earlier this month, when CEO Andrew Penn said the incumbent telco will "immediately" move to expand its 4G network to 99 percent of the Australian population should the ACCC confirm its draft decision.

Optus made the announcement in its annual financial results report, for which it recorded Australian mobile operating revenue for the year to March of AU$5.28 billion, down from AU$6 billion, which the telco again attributed to the regulatory decision in August 2015 to reduce the rate that mobile network operators can charge each other and fixed-line network operators for calls from 3.6 cents per minute down to 1.7 cents, and regulated SMS pricing from 7.5 cents to 0.03 cents per SMS.

As of March 31, Optus had 4.947 million post-paid mobile customers, adding 283,000 over the year, and 3.743 million prepaid customers, having added 62,000 over the year. Average revenue per user (ARPU) was AU$21 per month across prepaid and AU$47 for post-paid, dropping by AU$5 and AU$9, respectively.

Optus additionally added 39,000 mobile broadband customers during the year, to reach just over 1 million, with an ARPU of AU$20, down by AU$3.

According to a report earlier this week from market research company Kantar, Optus held 22.8 percent of Australia's total mobile market as of March 31, gaining 0.5 percentage points across both prepaid and post-paid during the most recent quarter.

Customers left Telstra and Virgin Mobile to join Optus, according to Kantar, largely due to its Samsung Galaxy S6 and S7 deals that bundled the handset in with data and streaming.

For the financial year, Optus reported a net profit of AU$794 million, down from AU$901 million a year earlier, on operating revenue of AU$8.43 billion, down from AU$9.12 billion.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) were AU$2.67 billion, down from AU$2.77 billion, which Optus said was due to "heightened price competition" in the enterprise sector, and increased content costs in the consumer segment.

"Despite heightened competition in the Australian market, Optus' strategy of delivering customer growth through music, TV, and sports content, underpinned by a robust and resilient mobile network, is on track," Lew added.

Optus made AU$460 million in consumer broadband and AU$103 million in pay TV, also making AU$620 million in wholesale fixed -- with AU$281 million coming from wholesale satellite services, AU$108 million from wholesale voice, and AU$231 million from wholesale data and IP.

Enterprise operating revenue was AU$1.53 billion, with AU$603 million from IT and managed services, AU$324 million from data and IP, AU$324 million from voice, and AU$277 million from mobile.

Overall, it had 225,000 National Broadband Network (NBN) customers as of March 31, 394,000 unbundled local loop customers, 447,000 hybrid fibre-coaxial (HFC) customers, and 456,000 TV customers.

Higher NBN revenue drove Optus' consumer growth, while its enterprise revenue fell thanks to businesses migrating to lower-cost IP-based voice services. Enterprise should grow over the next year, Optus said, thanks to its deals with Flight Centre and Energy Australia.

Optus also made note of the AU$134 million payment to the Australian Taxation Office for amended assessments that are now being disputed, and spent SG$25 million on "staff restructuring costs", with 610 fewer staff members as of the end of the period.

Optus in February reported a quarterly net profit of AU$188 million to December 31, down 17.3 percent year on year, on EBITDA of AU$650 million and operating revenue of AU$2.21 billion.

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