Telstra eats Optus' lunch

Singtel subsidiary losing customers and struggling to compete with the giant telco

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, 2013 2:21 pm AEST

The giant telecommunications octopus, Telstra Corporation (ASX:TLS) is eating its competitors lunch when it comes to mobile subscribers.

Optus, part of the Asian Singapore Telecommunications (ASX:SGT) group, has reported that it now has 5.5 million post-paid mobile subscribers, with 4 million pre-paid subscribers. While post-paid reported an increase of 4.3% over the previous year, the pre-paid segment dropped 4.9%, meaning the company added just 21,000 new mobile subscribers in the past twelve months. Over the past three months, the figures are even worse – 59,000 subscribers have left the company.

Compare that to Telstra's recent report that showed it had grown mobile subscribers by 1.3 million over the past year, and now has a whopping 15.1 million subscribers. And Vodafone – partly owned by Hutchinson Telecommunications (ASX:HTA) – continues to leak customers, losing 551,000 mobile subscribers in the first six months of this year alone.

As a result, Optus has been forced to cut costs, closing a number of retail stores and almost 600 staff have left the company in the past year. While that might lift the company's performance in the short-term, it's doing little to enable Optus to compete on the same footing as Telstra.

An Optus spokesperson says that Australians believed Telstra had the best network, which has helped it gain customers, adding that the giant Telco's aggressive strategy on mobile broadband was being driven harder than anyone else.

It's not just Telstra's superfast 4G network, but also the breadth of coverage the telco provides, including to remote regional areas that reinforces its dominance. As an example, at a music festival in rural NSW last year, only Telstra-connected mobile phones worked – and as you could imagine, they were in hot demand.

Foolish takeaway

While Optus and Vodafone are trying to catch up to Telstra with the launch of their own 4G networks, Telstra has the upper hand, and is using it to its full advantage.

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Motley Fool writer/analyst Mike King owns shares in Telstra.

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