Optus Mobile A Biright Spot In Quarter's Results

Written by Adam Gosling

Thursday, 09 November 2006

Second quarter results from Australian SingTel subsidiary, Optus Telecommunications were a mixed bag as the company fights to remain profitable in the face of increasingly competitive capped calling contracts and the fixed to mobile shift which is hitting landline providers hard, but giving mobile network carriers little joy from reduced terminations rates. Operating revenue for the company grew at 5.8 percent, when taking into account recent acquisitions (IT consultancy Alphawest and MVNO operation Virgin Mobile). Without these additions growth was a less than sterling 2.3 per cent over the prior year, according to information released by the parent company. Optus' operational EBITDA increased 1.4 per cent from the first quarter, but compared to last year was down 3.2 percent. This nasty result, SingTel says, was due to lower consumer fixed line earnings which drove EBITDA margins down to 26 per cent from 28.4 per cent a year ago. While the company's fixed line and broadband services revenues were under pressure, there were more optimistic results from the carrier's Mobile division which turned in some acceptable if not exceptional results. It managed an increase in its Mobile marketshare with the division's EBITDA margin even managing a small increase of one percentage point compared to the last quarter. This result, says the SingTel number crunchers, could be a silver lining as it reflects slowing revenue erosion from capped plans. Optus Mobile continued to contribute the largest proportion of Optus' earnings, growing revenue by 4.8 pr cent to A$1.04 billion, driven mainly by higher outgoing service revenues which grew by 7.4 per cent in the quarter despite greater mobile cap penetration. This increase reflected the continuing growth in prepaid accounts, solid SMS traffic and the inclusion of Virgin Mobile. ARPU increased compared to the preceding quarter. While outgoing service revenues were up, incoming service revenue decreased by 2.1 per cent to A$216 million as the result of lower termination rates mandated by the ACCC, said Optus. Average inbound termination rates fell 22 per cent from a year ago reflecting the reduction in the ACCC mandated rate to 15 cents. Higher commercially negotiated rates from last year began to expire accelerating this reduction. Equipment revenue in the Mobile business increased by 3.2 per cent to A$130 million. The company's Australian mobile subscriber base grew with an increase of 46,000 subscribers in the second quarter. Coupled with higher usage, and rising data volume, but balanced against the lower termination rates, the company managed a Mobile EBITDA increase of 1.4 per cent. The company also reported having 184,000 subscribers on its 3G network. Though their influence is waning, capped plans are all the go with around 32 per cent of new and recontracted customers selecting them. This result is similar to previous quarters, said the company, and is resulting in a higher proportion of caps amongst its contracted customers. Approximately 24 per cent of the total Optus post-paid mobile base is now under a capped plan, this up from 10 per cent a year ago. Other mobile highlights for the company include an 11 percent increase in Business mobile subscribers and a continuing shift to the higher margin data services. SMS and other data revenue increased to 23 per cent of ARPU from 21 per cent in the preceding quarter Overall Optus' second quarter after tax profit was A$130 million which, down a significant 12 per cent. Optus Chief Executive, Paul O'Sullivan said the company's results reflected Optus' position of taking decisive action in a high aggressive and competitive market. "We remain committed to our strategy of maintaining market share, managing costs and investing for growth," he said. "For the first six months of our financial year, we have seen a 5.6 per cent increase in operating revenue to A$3.70 billion and recorded an underlying net profit of A$239 million. "To mitigate margin pressure, we continue to implement cost management and productivity initiatives across the company including lower commission rates, reduced head count and call centre offshoring. The positive impact of these initiatives on EBITDA margins is now crystallising," he said. Related news items Ericsson To Build Vodafone HSPA -06/03/2008 Pretty Paintjobs Delaying Dell Notebooks -27/08/2007 Nokia, RIM, Panasonic - In That Order -28/02/2007 SANDISK INTRODUCES microSD MULTI SD KIT -21/02/2007 Sandisk Introduces The Largest Capacity Of The World's Smalles Flash Card For Mobile Phones -21/02/2007 Newer news items 3 Starts Mobile Broadband Price War: UPDATED -19/11/2006 Flat Rate Broadband Plan For 3G -16/11/2006 Vodafone Australia Exceeds Half Year Targets -14/11/2006 Soul's B Digital Offers Closes at 97.4% -13/11/2006 Soul Reaches 90% Of B Digital -08/11/2006 Older news items Vodafone Australia Signs For Nokia Services -02/11/2006 CFO Gets New SingTel CEO Gig -22/09/2006 Carriers Form 4G Lobby Group -14/09/2006 BigAir First Post-IPO Result A Ripper -13/09/2006 ACCC Rejects Telstra Mobile Termination Charges -11/09/2006 Tag This Now: