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Optus profit jumps AU$32m for Q1

Australian telecommunications provider Optus has recorded a net profit of AU$196 million on revenues of AU$2.3 billion, citing 4G mobile data uptake as its driving force.
Written by Corinne Reichert, Contributor

Optus has announced an increase in net profit of 19.5 percent for the quarter ending June 2015, from AU$164 million last year to AU$196 million this year.

Operating revenue was AU$2.3 billion for the second quarter of 2015, an 11.3 percent year-over-year growth in constant currency terms from the AU$2.1 billion reported during the same period last year. Revenue declined by 0.5 percent in terms of reported currency, however, due to parent company Singtel dealing with a weaker Australian dollar.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) grew by 7.3 percent for the quarter, from AU$597 million in the three months to June last year, to AU$641 million this year.

The telco's free cash flow plummeted by 67.2 percent, however, from AU$126 million down to AU$41 million.

Optus attributed its gains to growth in its mobile operations, customer retention, and increased take-up of handset repayments.

"This quarter's results underscore the strength of Optus' business fundamentals," Optus CEO Allen Lew said in a statement on Thursday.

"We are well positioned to capture future growth opportunities by bringing together our competitive advantage in customer experience with our renewed focus on driving innovations that entertain customers and enhance their lives."

Revenue in the telco's mobile business grew 5 percent in the quarter, to AU$1.21 billion, off the back of an increase in its post-paid customer numbers due to its My Plan Plus offering. Average revenue per user (ARPU) also increased by 5 percent for the quarter, with Optus attributing this to growing 4G data usage by mobile customers.

Optus added 38,000 post-paid customers over the quarter, including 290,000 4G subscribers, bringing its total to 9.38 million. As of June 30, Optus has 3.82 million 4G+ customers, making up 41 percent of its mobile subscriber base.

Fixed-line revenues increased by 3 percent thanks to unlimited home broadband bundles, uptake of Optus' unmetered Netflix offering, and growth in National Broadband Network (NBN) customers. The telco now has 54,000 NBN customers, and a total of 1.04 million broadband customers.

Last month, the Australian Competition and Consumer Commission (ACCC) granted draft approval for a revised agreement covering the transition of Optus' hybrid fibre-coaxial (HFC) customers onto the fixed-line NBN, and the progressive integration of parts of the telco's network with the NBN.

NBN welcomed the draft decision, agreeing that it will ensure the easy and efficient transition of customers to the NBN.

"Today's decision is yet another significant step that enables NBN to deliver better broadband to every Australian as soon possible and at the least possible cost," NBN CEO Bill Morrow said.

"The agreement between NBN and Optus delivers clear benefits to families and businesses. We are pleased to see that the initial view of the ACCC is the same."

The original deal between NBN and Optus was approved by the ACCC in 2012. Optus and NBN entered into a revised AU$800 million deal in December last year, allowing NBN to take ownership of Optus' HFC network. The modified agreement came as a result of the Coalition government's decision to move away from a full fibre-to-the-premises rollout to the present so-called multi-technology mix (MTM) network incorporating fibre to the node, fibre to the building, and HFC.

An estimated 3.27 million premises could be serviced by the HFC networks being taken over from Telstra and Optus, with customers beginning to be connected from March 2016.

Optus on Thursday also noted that its national 4G network now covers 90 percent of the population, with plans to extend this further.

"Since the beginning of 2015, we have switched on 700MHz spectrum at 2,400 metropolitan and regional sites," Lew said.

"Over the coming year, Optus will continue this important investment program so that more Australians can have access to reliable, super-fast 4G mobile services, in more places."

On Tuesday, the telco also launched an app enabling its customers to make and receive calls and texts to landline and mobile numbers globally via a Wi-Fi connection. The "WiFi Talk" app is an alternative to such VoIP apps as Viber, Skype, Google Hangouts, and FaceTime, with the advantage of using a customer's existing phone number.

"WiFi Talk is an innovative solution to help customers stay connected easily if mobile coverage is limited indoors, whether at home, in the office, or even in places such as shopping centres," said Amanda Hutton, VP of customer experience and delivery for Optus.

"Unlike traditional Wi-Fi calling applications, it uses your existing Optus mobile number when people call or text you, and they don't need the app or have to do anything differently."

The news comes off the back of Optus last week announcing plans to shut down its 2G network from April 2017 to shift its customers onto the 3G and 4G networks.

"Greater smartphone usage and advances in 4G technology are driving customer preferences for more mobile data and faster speeds, and there has been a steady decline in 2G traffic and customers in the last few years," said Dennis Wong, acting managing director for Optus Networks.

The transition from traditional calling to the use of data over 4G and Wi-Fi marks a trend in the increasing popularity of communications apps including Facebook Messenger and WhatsApp, spurring Optus' entry to the market through the Wi-Fi calling app.

"I think you've seen us starting to move away from being very mobile focused to one that is about integrating communications and entertainment for customers, regardless of where they are," Lew said in April.

In May, Optus reported adding 42,000 net new customers in the first three months of the year.

Telstra has also reported its results (PDF) earlier today, recording a net profit after tax of AU$4.29 billion for the 2014-15 financial year, down AU$260 million or 5.8 percent year on year from last year's AU$4.55 billion. Earnings before interest, tax, depreciation, and amortisation (EBITDA) decreased by 3.5 percent, down from AU$11.1 billion to AU$10.7 billion.

Australia's dominant telco attributed its loss in net profit to the sale of its Hong Kong mobile business, increased price competition from its rivals, and significant investment in its mobile 4G network. However, it is continuing to see growth in its mobile data, network applications and services, and IPTV businesses.

At the end of last month, rival telco Vodafone Australia announced a net loss of AU$183.6 million for the first half of 2015, up 13.3 percent from the AU$158.6 million loss in the same period last year. The company reported total revenue of AU$1.77 billion, a year-on-year increase of 2.9 percent.

The Vodafone results (PDF) also revealed a slight increase in its post-paid customer base, which grew 3.3 percent year on year in the half ended June 2015, to 3.1 million. Prepaid customers grew marginally, up 0.1 percent to almost 1.7 million, while ARPU increased by 2 percent year on year, to AU$51.32.

Last month, iiNet shareholders approved TPG's AU$1.5 billion takeover bid. The acquisition, which is yet to be approved by ACCC and the court, will result in TPG becoming Australia's second-largest telco after Telstra, increasing its customer base to 1.7 million.

The ACCC's examination of the deal in regards to concerns about competition is continuing, with the consumer watchdog's decision to be published on August 20.

"The proposed acquisition would combine two of the five largest suppliers of fixed broadband in Australia. The ACCC is exploring the extent to which the acquisition of iiNet will reduce competition by reducing the likely competitive tensions in respect of pricing, innovation, and service quality," ACCC chairman Rod Sims said.

Singtel has also announced its results for the quarter, reporting a net profit increase of 12.8 percent, or 16 percent in constant currency, to SG$942 million, up from SG$835 million. EBITDA fell 1 percent year on year, down to SG$1.24 million due to a weak Australian dollar.

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