Optus revenue dragged down by lower mobile call, SMS rates

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Optus revenue dragged down by lower mobile call, SMS rates

Expects $800m impact in FY17.

A mandated industry-wide reduction in mobile call and SMS termination rates forced revenues of Optus and parent SingTel down as much as 9 percent in the last quarter, with the bottom-line impact expected to grow fourfold next year.

From 1 January this year, termination rates for calls dropped from 3.6 cents per minute to 1.7 cents, and from 7.5 cents to 0.03 cents for SMS, in response to a directive from the Australian Competition and Consumer Commission.

The change - which SingTel costed at $183 million for FY16 - forced Optus' operating revenue down 9 percent for its fourth quarter ended March 31 to just over $2 billion, and dragged parent company SingTel's operating revenue down 6 percent to just over $4 billion.

SingTel said it expected the impact of the lowered rates to result in an $800 million hit to Optus' books in the next financial year, forcing mobile service revenue down by a percentage in the low teens.

The termination rates are the fees mobile network operators charge others to land calls and SMS. The ACCC previously only regulated the call rates, but last year decided to step in on SMS termination fees as well after the industry failed to lower abnormally high SMS rates. It similarly ruled call termination rates were above global standards.

However, the impact of the lower fees did not manage to dampen full-year financial results for either organisation, with Optus reporting an almost 7 percent rise in net profit to $931 million and a 4 percent jump in operating revenue for the full-year to $9.1 billion.

SingTel's full-year net profit rose 2 percent to $3.8 billion, where its operating revenue dipped slightly, just over 1 percent, to $16.8 billion.

In the three months to March 31, Optus added 231,000 4G customers to reach 4.68 million users on the network. The telco upgraded 3714 of its 4850 4G sites to 700 MHz spectrum during the quater.

Postpaid handset customers fell by 24,000 in the quarter due to wholesale deactivations after TPG decided to shift its 320,000 mobile users away from Optus and to Vodafone, and it also lost 26,000 mobile broadband customers.

The telco did however, add an extra 22,000 prepaid handset users. However postpaid handset customers are by far the most lucrative for the telco, with average revenue per user of $50 compared to $21 for prepaid customers.

For its fixed network, Optus added 25,000 NBN customers in the last quarter, and an extra 16,000 resale DSL customers. Average revenue per broadband user remained stable at $53.

SingTel said it expected to inject $1.8 billion into Optus out of its $2.8 billion capital expenditure budget over financial year 2017 - in line with what it spent last year - to continue its investment into improving the telco's mobile network.

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