Optus has warned of a “mid teens” decline in mobile service revenue for the financial year ended March 2017 as competition and regulated fee cuts in Australia continue to bite.
The telco today reported second quarter net profit of $184 million, down 20.3 percent on the same period last year, and $11 million above its first quarter result.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) fell 10.3 percent for the second quarter.
Optus CFO Murray King said the EBITDA decline was a "reflection of customer acquisition activity in prior quarters and essentially the amortisation of the subscriber acquisition costs over the customer contract term", as well as "increased acquisition costs associated with content", such as securing local rights to English Premier League (EPL) content.
"Below the EBITDA line, we’ve seen depreciation and amortisation increase as well because of the investment we are making in our mobile network," he said.
"That, together with the EBITDA decline, is essentially driving the net profit decline."
Optus CEO Allen Lew did not rule out any course of action to return Optus to profitability.
"Our profit margins are very important to us,"lew said.
"We are always looking at ways of optimising our costs.
"I think right now we are looking at all different areas within Optus, exploring the different options and looking at the implications of these options. I have not made a decision but we are exploring options."
Mobile by the numbers
Operating revenues – particularly in Optus' consumer business – continued to take a hit from regulated cuts to mobile termination rates, as well as increased competition in Australia’s mobile market. Both dragged down parent Singtel’s group results.
Lew said he believed Australians already had "enough choice" in the mobile market, and that the market may not be able to support the entry of another infrastructure operator.
"There is pretty intensive completion already in Australia with three infrastructure providers and a host of MVNOs," he said.
"From our perspective, there’s more than enough choice. I really don’t see a need for another competitor at this stage."
Despite the net profit and EBITDA declines, Optus said its postpaid handset customer base grew by 88,000 in the second quarter – or 90,000 if enterprise customer growth is included.
It had an overall gain of 84,000 mobile customers “across all business segments” during its latest quarter.
It also saw 335,000 new sign-ups to 4G mobile services during the second quarter, meaning its total 4G mobile subscriber base – including those on MVNO services – breached five million.
Wholesale fixed revenue fell 2.7 percent, while NBN growth helped Optus grow its mass market fixed operating revenues by 6.1 percent.