Optus profit plunges into the red after pandemic-hit year

Optus profit plunges into the red after pandemic-hit year

During the year, Optus’ revenue declined by 7 per cent to $8.32 billion.

Kelly Bayer Rosmarin (Optus)

Kelly Bayer Rosmarin (Optus)

Credit: Optus

Telco Optus posted a net loss of $208 million in the year ending 31 March, a dramatic decline from the $402 million profit reported the year prior.  

The company, a subsidiary of Singapore telco giant Singtel, said its results for the full year reflected the continued impacts of the COVID-19 pandemic and its associated travel restrictions on revenues from visitors, students and outbound travellers, as well the structural impacts of the National Broadband Network (NBN). 

During the year, Optus’ revenue declined by 7 per cent to $8.32 billion, while earnings before interest, tax, depreciation and amortisation (EBITDA) declined by 25 per cent and earnings before interest and tax (EBIT) declined by 77 per cent. 

Along with the pandemic, Optus pinned the declines on lower NBN migration revenues and market headwinds which led to lower equipment sales and leasing revenues, as well as lower fixed broadband margins from higher NBN costs as customer bandwidth consumption continued to rise. 

“This has been a challenging year with COVID-19 and structural NBN impacts affecting the whole industry,” said Kelly Bayer Rosmarin, Optus CEO. “However, Optus continued to prioritise keeping Australians connected, ensuring our teams were safe and employed, and investing in our network, customer service and digital experiences.  

“During the second half of the year we’ve seen improvements across the board as a result of disciplined execution of those priorities,” she added.  

Indeed, in the second half ending 31 March 2021, Optus saw momentum with growth of 5 per cent in operating revenue, 5 per cent in EBITDA and 73 per cent in EBIT when compared to the first half, driven by stronger equipment sales, improved mobile net connections and average revenue per user (ARPU) growth. 

It should be noted, however, that the second half also saw the company post a six-monthly net loss of $181 million, whereas the first half saw it report a loss of $27 million.  

Operating revenue in the second half of the year declined 5 per cent year-on-year to $4.26 billion, mainly driven by NBN migration revenue tapering off from the previous year’s high as migrations near completion. Excluding NBN migration revenues, operating revenue was stable, the company said.  

Despite the declines, Optus had a few bright spots. For example, Optus Enterprise saw EBITDA growth, reflecting a combination of improved sales volumes, strong cost stewardship and support for enterprises seeking to lockdown-proof their workforces. 

Additionally, mobile service revenue returned to growth driven by higher postpaid revenue from increased penetration of the company's Optus Choice plans. This resulted in total Optus ARPU postpaid growth of 4 per cent compared to the corresponding half year. 

According to Rosmarin, the second half revenue growth and disciplined price management indicated new momentum for Optus. 

“Through these challenging times we’ve kept customers at the very heart of our decision making, demonstrating our commitment through clear product leadership and innovative solutions such as our Unlimited Data Days, introduction of our Optus Fitness streaming service, and continued digital developments with My Optus App,” she said.  

“We will continue to deliver customer-led differentiation through digitalisation, the Optus Living Network and 5G speed leadership, and it’s deeply rewarding to see the satisfaction this brings to our customers.” 

The period in question saw Optus acquire the mobile business of wholesale partner Amaysim for $250 million in an all-cash offer, as part of its mobile virtual network operator (MVNO) strategy. 

The acquisition was expected to see the telecommunications provider acquire approximately 1.19 million customers.  

Optus parent Singtel has seen its net profit for the year ending 31 March 2021 plunge by 93 per cent, year-on-year to S$88 million, with the company breaking out a new strategic ‘reset’ aimed at capturing “untapped digital growth”. 

In its latest annual financials, published on 27 May, the company revealed that its underlying net profit was down 30 per cent year-on-year to S$1.73 billion due to continued industry and COVID-19 headwinds. Operating revenue, meanwhile, was down five per cent year-on-year to S$15.64 billion.  

Moreover, Singtel’s operating revenue for the full year was down five per cent to S$15.64 billion, reflecting the headwinds faced by Optus.

However, the company said that, to capitalise on the large-scale digitalisation underway in the market – and the digital transformations that underpin it – it would develop a number of new growth engines, key among these being NCS, Singtel's IT services subsidiary.

NCS,a branch of which was launched in Australia in December last year, will be repositioned for growth, with the goal of becoming a business-to-business (B2B) digital services ‘champion’ in Asia Pacific. 

In this goal, the NCS subsidiary will set up two strategic business units to focus on the key sectors of government and telecoms, as digitalisation of processes and services continue to accelerate.  

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