Optus struggles under Telstra’s dominance

Optus struggles under Telstra's dominance

Revenues fall, despite increasing mobile users

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published August 14, 2012 5:44 pm AEST

Australia's second largest telecommunications company, Optus, has reported a 3% fall in first quarter revenues. The company – wholly owned by Singapore Telecommunications (ASX: SGT), appears to be struggling against Telstra Corporation's (ASX: TLS) growing dominance of the mobile market. Mobile revenues fell 4%, impacted by terminations and lower sales of mobile phones.

The company added 88,000 new postpaid customers in the last quarter, and around 400,000 over the last year – compared to Telstra's 1.3 million new customers in the last 12 months. Average revenue per unit (ARPU) was $60, compared to Telstra's ARPU of $65. So Telstra is adding many more customers and earning more from each. Optus does have an advantage over Telstra when it comes to mobile churn, reporting churn of just 1.7% compared to Telstra's 12.2%.

The company also lost 65,000 prepaid customers during the quarter, and for the year added a net 17,000 new prepaid customers. What appears to work very well for Optus is wireless broadband. The company reported a 15% jump in new customers to 1.6 million.

Hutchison Telecommunications (ASX: HTA) reported that it had lost $131m on its half share in Australia's third-largest telco,Vodafone, in the first half of 2012, following a loss of $168m for the full 2011 year. Customers have been leaving Vodafone in droves – 178,000 left in the first half of 2012, while 554,000 customers left in 2011. Network reliability and customer service issues dogged Vodafone in 2010, 2011 and earlier this year, until it fast-tracked a $1 billion investment into the network. The company has also signed an agreement with Optus to share the cost of rolling out hundreds of base stations, but is waiting for regulatory approval.

Vodafone's ARPU also has also fallen by 6.7% to $49, well below rivals, Optus and Telstra.

Internet service providers (ISPs) have also moved into providing mobile phones and related services, connecting to one of the big three's networks. As an example, iiNet Limited (ASX: IIN) and TPG Telecom Limited (ASX: TPM) both use the Optus mobile 3G network.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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