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Underperforming enterprise division leaves Optus with disappointing financials

Underperforming enterprise division leaves Optus with disappointing financials

Telco also points to increased competition and the ACCC as reasons for poor showing

Allen Lew - CEO Optus

Allen Lew - CEO Optus

Optus has reported lacklustre yearly results which the company has attributed to increased competition, higher costs of device repayment credits as well as poor performance from its enterprise business.

The results were likely no surprise to investors, as the company reported a drop in profit for the past three quarters, yet the four per cent drop in earnings to $2.67 billion was no doubt unwelcome.

The telco said that its enterprise division had underperformed, and that this was one of the contribution factors to the 12 per cent drop in net profit from $901 million to $794 million.

The company's operating revenue for the year dropped 7.6 per cent from $9.1 billion to $8.4 billion. Operating expenses fell by 10.4 per cent from $5.1 billion to $4.6 billion.

In the mobile space, revenue fell 12.3 per cent for the year with the company citing increased competition in the space and the The Australian Competition and Consumer Commission’s (ACCC) regulated reduction in mobile termination rates as factors

Its mass market fixed income - which includes voice, broadband and pay TV - was the one positive from the results, growing eight per cent in the year, making it the only local division to turn a profit in the period.

The company’s fixed wholesale business decreased by 4.4 per cent, which was mainly driven by a 16.6 per cent loss in the wholesale voice division.

“Australia Consumer reported an increase in operating revenue of 3.1 per cent despite continued intense competition,” the company said in a statement to shareholders. “The increase was driven by higher NBN revenue and Equipment sales partially offset by increased mobile service credits from device repayment plans.”

Optus parent company, Singtel, said its Australian Consumer division reported the highest quarterly mobile customer net additions in the last five years.

“The postpaid handset customer base continued to grow strongly by 78,000 this quarter, with the branded handset customer base increasing by 70,000. The prepaid handset customer base grew 64,000 from a quarter ago,” it added.

The number of Optus’ 4G mobile customers increased by 254,000 this quarter, resulting in the total 4G customer base hitting 5.72 million at 31 March 2017.

Optus said it has continued to invest in its mobile networks, reaching 96.1 per cent of 4G population coverage with 5,872 sites upgraded to 4Gs, of which 4,893 have been upgraded to 700 MHz spectrum.

The company has also opened the country's first 4.5G network services in Macquarie Park in NSW and achieving speeds of up to 1.03 Gbps during testing.

Optus’ Mass Market Fixed - wholesale - operating revenue grew 19 per cent which it attributed to higher NBN revenue driven by NBN customer growth of 115,000 from a year ago and timing of migration payments.

Excluding NBN migration and preparation fees, Mass Market Fixed revenue grew 3.5 per cent.

It said wholesale fixed revenue was stable year-on-year mainly attributable to decline in satellite revenue offset by higher Data & IP revenues.

Optus CEO, Allen Lew, said despite heightened competition in the Australian market, its strategy of delivering customer growth through music, TV and sports content, underpinned by a robust and resilient mobile network, is on track.

“Throughout the year, Optus continued to enhance the competitiveness of its network – with A$1.5 billion in capital expenditure," Lew said. "At the end of March 2017, Optus’ 4G network reached 96.1 per cent of Australians.

"Through the deployment of significant spectrum holdings and innovative technologies such as 4.5G and native Voice over WiFi, Optus is improving network coverage and download speeds for its data-hungry customers,” he added.

“We welcome the ACCC’s draft decision not to declare domestic mobile roaming. This decision will provide Optus with the certainty it needs to invest a further $1.5 billion in 2017/18 to deepen network capacity and coverage, and continue delivering high quality services, choice and competition, particularly in regional Australia,” Lew said.


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