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Optus profit drops 12 percent for 1Q17

Optus continues to remain optimistic about the business transformation it is undertaking, despite seeing net operating revenue drop to AU$2 billion for the first quarter of the 2017 financial year.
Written by Aimee Chanthadavong, Contributor

Optus has reported a 13 percent decline in operating revenue for the first quarter of the 2017 financial year, blaming it on the decision by the Australian Competition and Consumer Commission last August to reduce charges for mobile termination rates that came into effect on January 1.

Operating revenue dropped to AU$2 billion, down from AU$2.3 billion reported during the same period last year. Meanwhile, net profit for the period came in at AU$173 million, a decline of 12 percent.

However, the declines were offset by a 0.7 percent increase in earnings before interest, tax, depreciation, and amortisation to AU$645 million for the period ending 30 June 2016. The company noted the EBITDA growth was affected by device repayment plan service credits, which were partly offset by the refund of GST related to prior periods.

Operating expenses also fell by 20 percent for the quarter, which the company said was due to lower domestic interconnect costs associated with reduced termination rates, lower equipment costs, lower customer acquisition and retention costs, and a reduction in advertising spend.

Overall, the company described the first quarter financial results as "stable", particularly as the telco continues to work on becoming a multimedia provider.

As part of the change, Optus has so far announced the restructure of its Enterprise and Consumer divisions, which will include "reshaping" its workforce such as considering outsourcing back office HR and finance roles.

"This was a very busy quarter, as price competition remained intense, especially in the MVNO market," Optus CEO Allen Lew said.

"We've competed effectively with our branded, wholesale and fixed line products, and have focused on delivering a quality live video experience, starting with the launch of the Optus Sport channel in early July. We have already received some very positive responses from customers who've seen our first live broadcast of international soccer games."

During the quarter, Optus also managed to grow its postpaid customer numbers with the net addition of 19,000, and postpaid mobile average revenue per user (ARPU) adjusted for the impact of mobile termination rates and device repayment plans increasing 4 percent year-on-year.

The company lost 24,000 prepaid customers, which Optus said was due to the introduction of customer identification verification regulations.

The company also reported 4G Plus customers now account for 53 percent of Optus' total mobile customer base, where it managed to add another 257,000 during the quarter, pushing total numbers to 4.93 million at the end of June.

Optus said its 4G Plus network, which is now available at 5,155 regional and metropolitan sites, reaching 95 percent of Australians at the end of July.

The telco giant also launched the roll out of its voice-over-LTE (VoLTE) capability over its 4G Plus mobile network, starting in the major capital cities of Sydney, Melbourne, Canberra, Brisbane, Perth, and Adelaide.

Meanwhile, its fixed-line network saw a 4 percent growth in operating revenue, thanks to the growing uptake of Optus TV and strong demand for DSL resale in regional markets, as well as a growth in national broadband network (NBN) customers, which now sits at 136,000, up from 54,000 from a year ago. Optus now has a total of 1.08 million broadband customers.

"In the coming quarters, Optus will continue to strengthen and expand its national 4G network and enhance its fixed network to deliver a market-leading, multi-media entertainment experience for customers," Lew said.

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