Vocus won't actively pursue more consumer NBN services

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Vocus won't actively pursue more consumer NBN services

Calls it "economically unattractive".

Vocus will step out of the NBN ‘land grab’ for new residential connections and focus instead on more profitable wireless and mobile services.

The telco used its half-year results today to confirm that the NBN had fallen out of favour.

It had hinted back in December that a change of direction was imminent, when it renegotiated a mobile virtual network operator (MVNO) agreement with Optus to include 5G services.

Vocus has repeatedly called out low margins in the NBN business compared to legacy ADSL. More voices - including higher-profile ones such as Telstra CEO Andy Penn - have since also taken NBN to task over its pricing.

Today, the company said there was "no profit margin" to be had on consumer NBN services "after costs to migrate, acquire and serve, together with backhaul and other admin and operational costs".

The consumer NBN business was "cashflow negative" once the cost of modems and backhaul agreements were taken into account.

Additionally, Vocus said that NBN resellers in general had been "unable to construct products that customers want, with sustainable product margins".

“The variable nature of NBN pricing is incompatible with the fixed prices paid by end consumers,” Vocus said in a statement today.

“The complexity of NBN pricing, together with a lack of pricing stability, add operational complexity and hence cost.

“For these reasons, NBN broadband is economically unattractive, especially for new customers in our consumer brands.

“Consequently, we do not intend to grow NBN share in this market but will focus on optimising the broadband experience for existing customers.”

iTnews has confirmed that Vocus will not completely retract its consumer-oriented NBN offerings from the Dodo and iPrimus websites.

In other words, it will continue to offer residential products but abandon the aggressive pursuit of new customers.

Vocus’ decision to effectively not contest for new consumer NBN connections is likely to lead to an even greater concentration of power in the NBN market.

Vocus said that its broadband brands - Dodo, iPrimus and Commander - still had “real equity” and that they would grow in ways “where it makes economic sense”.

“The Optus MVNO deal signed in December gives Vocus the ability to participate in the wireless broadband and mobile market, including the coming 5G environment, and to take advantage of the opportunities in the wireless market across all our brands, including applications for business within Commander,” Vocus said.

Vocus CEO Kevin Russell said on an analyst call that Optus' forthcoming fixed wireless product on precursor 5G technology "is very interesting and very exciting."

However, he noted that Vocus doesn't have any specific agreement to resell a white-labelled version of it.

"Just to be clear our MVNO arrangement with Optus right now includes 5G but does not include fixed wireless yet," he said.

"That is something that Optus and ourselves will talk about in the months ahead but it is clear there is a strong strategic alignment between our two companies to make that opportunity happen."

Russell said that Vocus saw opportunities to play in the 5G market since it had substantial fibre assets and regional backhaul that could be useful to mobile operators deploying dense cellular networks.

"But also the opportunity to bypass high costs on NBN into an alternative, cheaper product and arguably better product in terms of pricing construct is ultimately attractive to us," Russell said.

Vocus is still likely to see some growth in NBN services in operation (SIOs), as it sells connections via a wholesale offering as well as to businesses.

The telco said that the economics of selling business NBN connections were "slightly better than [for] consumer, at this stage".

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