M2 moves away from prepaid services following ispONE collapse

M2 Telecommunications will shift its focus away from prepaid mobile and mobile broadband services which are 'unviable in the longer term' to postpaid services, the telco's CEO said today.

Speaking after the group posted a 33 percent jump in full-year net profit to $43.8 million, off higher revenue of $681 million, M2 chief Geoff Horth said in light of "new entrants who've recently become new exits", the company would refocus its efforts on postpaid services.

He said M2 did not consider prepaid services a core value asset.

“Whilst we're not walking away from prepaid services by any standard - we have a retail distribution, we have online ordering - we do believe that there’s some question marks about the sustainability of that market in the long term,” Horth told investors today.

The comments come after last week’s collapse of Telstra prepaid wholesaler ispONE, which also put in doubt the future of mobile virtual network operator Kogan Mobile.

In July, M2 Communications invested $2 million in ispONE competitor Inabox Group.

M2 is expecting to boost earnings and profit by up to 54 percent next financial year, as it capitalises on its June 2012 $192.4 million acquisition of Primus and starts connecting customers to the NBN.

During the year M2 said it completed the rollout of 15 new NBN points of interconnect and finalised the integration of Primus.

It also completed the functional and structural integration of internet service providers Dodo and Eftel, which it acquired in May. Following the acquisitions, the group now has 1.4 million active postpaid services.

Horth said the group was now working on marketing its brands for NBN connections.

“It’s not just about growing share in NBN, it’s about making sure that customer trust is well and truly entrenched, so that when that decision point comes to move to NBN, we’re a no brainer," Horth said.

The group is also improving its business intelligence, Horth said, with the deployment of a new CRM system.

“We’re looking at what the triggers are for customers to not only churn but to buy new products, and really leveraging those triggers to make sure we grow share of wallet, and frankly to build that trust so we’re well positioned to defend our stake as customers transition to the NBN," he said.

The company's recent string of acquisitions had resulted in a collection of complex IT systems, Horth said, which M2 would now look to simplify.

“We think that investing in technology, improving our systems and technology environment is going to be key to making sure we simplify our business and sustain a cost-to-serve advantage.”