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Vodafone revenue down to AU$3.4b on ACCC decision

Vodafone Australia reported a net loss of AU$241.8 million on revenue of AU$3.35 billion thanks to the AU$470 million impact of the regulator's decision to cut the rates for mobile termination.
Written by Corinne Reichert, Contributor

Vodafone Australia has reported a net loss of AU$241.8 million for the year on total revenue of AU$3.35 billion, an 8.4 percent year-on-year decrease.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) were AU$912.2 million, a 12.2 percent increase from the AU$812.8 million reported for the last year.

Net average revenue per user (ARPU) was AU$37.97, a loss of AU$7.71 from last year's AU$45.68; gross ARPU, which takes into account handset repayments on post-paid plans, decreased by 12.4 percent, from AU$52.38 to AU$45.87.

Vodafone attributed its declines across ARPU and revenue 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.

The telco said its gross ARPU rose by 3.6 percent to AU$43.77 and revenue increased by 5.7 percent to AU$3.2 billion when not taking the mobile termination rates into account.

"When looking to our revenue for this year, our actual reported revenue declined by 8 percent, which was entirely driven by mobile termination rate cuts," Vodafone Australia CFO James Marsh said during the financial results call.

"That impacted our revenue by just over AU$470 million year on year. When you remove that from the numbers, our revenue increased by 5.7 percent, and our revenue excluding incoming revenue was AU$3.2 billion."

Marsh also said it is encouraging that the company has become free cash flow positive for the first time since its merger with Hutchison in 2010, with its increase in EBITDA attributed to a rise in customer base and ARPU.

"VHA's double-digit EBITDA growth, which is a key indicator of the company's increasingly solid performance, was mainly driven by the uplift in customer base and ARPU complemented by continued cost management," Marsh said.

"The growth in our customer base was driven by the post-paid segment, with consumers attracted to our customer-friendly propositions such as AU$5 Roaming and AU$0 Roaming to NZ, and Red plan products ... in 2016 we saw a 42 percent increase in VHA's roaming revenue.

As of the end of December, post-paid customers totalled 3.35 million, while prepaid customers numbered 1.65 million and MVNO customers reached 556,000, for a total network customer base of 5.56 million.

The telco gained 125,000 customers over the year. Despite this gain, however, market research company Kantar reported earlier this week that Vodafone again experienced losses in its mobile market share -- it now holds 14 percent of the total mobile market, made up of 13.2 percent of the prepaid market, 15.5 percent of the post-paid market, and 9.3 percent of the no-contract segment.

CEO Inaki Berroeta said that Vodafone's net promoter score (NPS) went up by 13 points between January and December; however, the most recent statistics from the Australian Telecommunications Industry Ombudsman (TIO) showed that consumer complaints about Vodafone Australia jumped during the July to September 2016 quarter, from 4.1 complaints per 10,000 services in operation (SIO) reported in October 2015 to 6.2 complaints in 2016, and almost two-thirds more than the previous quarter's 3.8.

Vodafone at the time attributed the rise in complaints to "administrative matters". The complaints may have also been due to the 4G mobile outage it experienced in September, which affected data, voice, and text messages.

Berroeta also said that Vodafone Australia is looking towards its launch on the National Broadband Network (NBN) this coming year, with the telco aiming to conduct service trials in the months prior to launching.

"Since we announced our plans to launch fixed broadband services, we have received significant interest from customers who want to be connected to VHA at home and at work, as well as on their mobile," Berroeta said on Thursday.

"In recent months, we've stepped up preparations for fixed broadband, especially around products and service capabilities, and we're excited about launching this service to customers later in the year."

Vodafone in October announced its plans to enter the NBN market during 2017.

During the results presentation, Berroeta referred to the "vicious cycle" driving the monopolies in telecommunications markets, again pushing infrastructure sharing via wholesale mobile domestic roaming -- whereby it would be permitted to piggyback off Telstra's mobile infrastructure -- and reform to the universal service obligation (USO).

To improve its coverage across Australia, Vodafone is also building out more mobile towers both through its own investments and as part of its obligations under the federal government's mobile blackspots program, and by leveraging its spectrum holdings.

Vodafone will build out just four mobile base stations under round two of the mobile blackspots program, after being responsible for 70 under round one.

The Productivity Commission's draft report into the USO, released in December, revealed that although Vodafone claims to have 96 percent of the Australian population covered by its network, or 23 million people, only 7.5 percent of the continent's landmass is covered.

By contrast, Optus claims 98.5 percent population coverage and covers 15.6 percent of the nation, while Telstra's 99.3 percent of the population amounts to covering more than 31 percent of the landmass with its mobile network.

Optus last week reported a quarterly net profit of AU$188 million, down 17.3 percent, on revenue of AU$2.21 billion, down 9.3 percent, while Telstra recorded a half-year profit drop down 11.8 percent down to AU$1.8 billion on revenue of AU$12.8 billion, down 6.4 percent, with both also citing the impact of the mobile terminating rates decision.

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