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Optus sees Q3 net profit decline amid mobile growth

Optus has seen its net profit for the third quarter drop by 8.2 percent compared to the previous year, despite adding 100,000 new handset customers during the quarter.
Written by Leon Spencer, Contributor

Optus has seen its operating revenue grow by 6 percent for the third quarter, to AU$2.3 billion, boosted by strong mobile service growth. Earnings before interest, tax, depreciation, and amortisation (EBITDA) grew by 3.7 percent, according to its latest quarterly results.

The results, which were released on Thursday as part of parent company Singtel's third-quarter statement (PDF), revealed that the company's free cash flow for the quarter was up by 23 percent to AU$306 million, driven by a higher EBITDA of AU$652 million.

However, net profit for the quarter declined by 8.2 percent on higher net finance expenses, with the company saying that this was mainly due to higher dividends received from associates in the same quarter the previous year.

Mobile service revenue for the three-month period grew by 4.3 percent, to AU$1.22 billion, with the company attributing the increase to "robust mobile handset customer growth".

Optus' mobile handset customer growth is likely to have been largely driven by new sales of the iPhone 6 and iPhone 6 Plus handsets, of which Apple sold 74 million globally in the quarter ending December.

"Optus' second consecutive quarter of revenue and mobile handset customer growth reflects the strength of our core business," Optus CEO Allen Lew told shareholders in a statement (PDF). "Our strategy to achieve long-term sustainable growth by continual customer service improvements and delivering innovative products and services such as data sharing and Cash by Optus is on track."

Without explicitly mentioning iPhone 6 sales, the company said that a strong take-up of its My Plan Plus plan -- which it offers with the Apple handsets -- along with its Prepaid Daily Plans continued to drive customer growth throughout the quarter.

Optus said it added 100,000 mobile handset customers during the quarter, with growth in both the prepaid and the post-paid segments.

Despite this boost in mobile handset customers, the company's results revealed that across the board, it saw its total customer base decline by 12,000.

According to an Optus spokesperson, this decline was due to the introduction of data sharing in July last year. Previously, the company counted customers rather than devices to determine its total customer base, with users often claiming more than one device.

Now, the company splits the customer tally out by post-paid, prepaid, and mobile broadband devices so as not to double count a customer who is data sharing. Therefore, mobile broadband customer numbers now refer to customers who have a stand-alone SIM-enabled tablet.

During the quarter, Optus added 435,000 4G mobile customers, bringing its 4G customer base to 3.18 million, up from 2.75 million in the previous quarter. The company also saw a 12 percent increase in data revenues for the quarter.

Meanwhile, Optus said that its blended average mobile revenue per user increased by 5 percent compared to the same period the prior year, reflecting steady growth in its 4G base, and higher data usage by both post-paid and prepaid customers.

December saw Optus reach a revised agreement worth approximately AU$800 million with Australia's National Broadband Network builder NBN Co on the migration of its hybrid fibre-coaxial (HFC) customers to the NBN.

Optus told shareholders today that under the terms of the deal, once its HFC subscribers have been migrated to the NBN, Optus will progressively transfer ownership of its coaxial cable and ancillary assets to NBN Co, while retaining ownership of strategic aerial fibre assets used to connect mobile base stations and business customers.

In its quarterly results, parent company Singtel said that it had increased its net profit for the third quarter by 11 percent compared to the same period the previous year, to S$970 million, off the back of growth in mobile data services across Singapore, Australia, and its regional mobile businesses.

The company's group operating revenue grew by 3.8 percent to S$4.28 billion, but its EBITDA declined by 2.8 percent, due to the Australian dollar weakening by 45 percent. The company told shareholders in its quarterly statement that in constant currency terms, revenue would have increased by 6.6 percent, with a stable EBITDA.

"We delivered a solid third-quarter performance and successfully increased mobile data revenues with better networks, technology, content, and service," said Singtel Group CEO Chua Sock Koong. "In Singapore and Australia, we proactively acquired and re-contracted customers on the back of smartphone launches, and successfully upgraded them to higher-tiered data plans.

"The regional mobile associations also saw significant take-up of mobile data with higher smartphone penetrations," she said.

The Singtel and Optus results come as Telstra reports a net profit after tax of AU$2.1 billion in the first half of the 2014-15 financial year, off the back of the iPhone 6 launch, and improved revenues on mobile due to increased data usage.

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