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Optus pins 10 percent profit decline on termination rates and Sport launch

For the half year, Optus has seen its revenue fall by more than 10 percent, and EBITDA decrease by 5 percent to AU$1.28 billion.
Written by Chris Duckett, Contributor on

Optus has announced its second quarter results, with revenue falling by almost 9 percent for the quarter compared to the same time last year to AU$2.1 billion, and earnings before interest, tax, depreciation, and amortisation (EBITDA) dropping by 10 percent to AU$633 million.

For the half year the company has experienced a 10 percent drop in revenue, from AU$4.6 billion in 2015 to AU$4.1 billion this year, and a 5 percent drop in EBITDA to AU$1.28 billion.

The telco said its revenue decline came as a result of its Sports launch and the ACCC decision in August last year 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.

Optus said it had seen record growth on its own services, with the addition of 107,000 postpaid handset customers during the quarter. The total mobile customer number for Optus now sits at 9.42 million.

The company saw its postpaid handset average revenue per user (ARPU) fall 20 percent to AU$47 a month, and prepaid handset ARPU drop by 24 percent to AU$22. Overall mobile revenue contributed AU$921 million.

In its fixed business that saw a 6 percent jump to AU$307 million in revenue, Optus now has 164,000 NBN customers, a 28,000 jump from last quarter; HFC customers now total 437,000 after an additional 4,000 were added during the quarter; and the company now has 447,000 ADSL customers.

For its Optus enterprise division, revenue grew 1 percent to AU$393 million year-on-year and EBITDA fell 15 percent to AU$65 million. The telco said it faced "intense competition" in the sector while it grew IT services by 11 percent, and carriage revenues declined by 5 percent.

"These first half results reflect Optus' efforts to drive customer growth through differentiated content," Optus CEO Allen Lew said. "Optus is seeing signs that its focus on product innovation and network investment is having a positive effect on customer advocacy, with our Market Net Promoter Score (NPS) improving 6 points to +12."

"This is our highest score since we began tracking NPS and indicates that our customers have noticed the improvements in our mobile and fixed networks, and are enjoying Optus' range of products and services."

More the past year, Optus had held the crown as Australia's most complained about telco, consistently having more complaints per 10,000 services in operation than competitors Telstra and Vodafone according to the Australian Telecommunications Industry Ombudsman.

Looking ahead, Optus said its mobile service revenue would decline by "mid teens" for the financial year, and the telco is set to send AU$1.8 billion in capital costs over the year.

For its full year results released in May, Optus posted AU$901 million in net profit, up 7.1 percent from the AU$841 million recorded for FY15, with operating revenue of AU$9.12 billion, up 3.7 percent from AU$8.79 billion.

"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," Lew said at the time.

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