SingTel

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Optus under pressure from lower dollar
THE AUSTRALIAN AUGUST 14, 2015 12:00AM

Supratim Adhikari

Technology Editor
Melbourne

Optus mobile revenue Source: TheAustralian

A weaker Australian dollar will force Singtel-Optus to become more careful about how it spends the $S1.9 billion ($1.8bn) allocated to boost the telco’s presence in Australia over the next year.

Optus CEO Allen Lew told The Australian that the telco would have to be a lot better at optimising its spending as it strove to close the gap on Telstra.

“Our suppliers bill us in US dollars, so the weakening of the Australian dollar means we are going to get less (bang) for our buck unless we find another way of getting greater efficiency from our capital spend,” Mr Lew said.

“The way the currency is going it’s going to give us some challenges, but Optus is all about finding creative ways to optimise our capital spend.”

In May, Optus parent Singtel pledged to pump $S1.9bn into Optus over the next year to increase the footprint of the telco’s mobile network and increase its share of the fixed-line market.

Mr Lew’s comments came as Optus’s net profit increased 20 per cent to $196 million during the three months to June 30. Earnings before interest, tax, depreciation and amortisation grew 7 per cent to $641m in the quarter, as mobile services revenue rose 5 per cent to $1.21bn.

Meanwhile, operating revenue was up 11 per cent to $2.30bn.

While intense competition in the mobile market has seen Optus lose 47,000 pre-paid handset customers and 45,000 mobile broadband customers in the quarter, Mr Lew said that there was still an opportunity to make some incremental gains in a saturated local market.

That opportunity, according to Mr Lew, comes as telcos increasingly become digital companies — more than just simple carriage providers.

“One of the big reasons why our fixed revenues have grown compared to where they were one year ago is because we bundle broadband with video products like Netflix and Fetch TV,” he said.

“The big opportunity for us is how we come up with a better proposition that enhances connectivity but also has something exciting attached, like video entertainment in the short term and a few other things in the long term.”

Telstra, which delivered a full-year net profit of $4.23bn on Thursday, still holds the edge with regards to network reach, but Mr Lew said Optus was catching up and already reaping the benefits of a broader, more robust network.

“Where we have parity of network with the biggest player in the market we see that our customers are much more engaged with us,” he said.

He added that the launch of WiFi Talk, which allows customers to make and receive calls and text messages over a Wi-Fi connection rather than a cellular network, allowed it to provide a competitive basic mobile voice service that went toe-to-toe with Telstra’s Air service.

The impending entry of tier-three players like Singapore-based internet start-up, MyRepublic, which promises to offer an unlimited 100 megabit per second service priced at $80-$90 per month, is expected to raise the competitive staked for the likes of Telstra, Optus and TPG-iiNet.

However, Mr Lew said that the start-up might find itself fighting for customers in a crowded market.

“These guys coming in here are going to have their hands full, and where we are with Optus we are one step above and beyond,” Mr Lew said.