Analysts predicted little change to mobile market rankings after Optus reported negative Q1 results. However, its position as the number two telco may not be a problem for Optus, according to analysts.
"I don't believe that Optus can catch Telstra in mobile, unless they were to seriously disrupt the market," said Telsyte analyst Chris Coughlan.
Optus may most benefit from "being a fast follower" of Telstra, Gartner analyst Geoff Johnson said. To beat Telstra could prove to be more expensive than trying only to match the number one telco, and Optus in the near term doesn't have to worry about the currently "toxic" Vodafone, he said. Optus parent SingTel's multi-country strategy may need two to three years to pay off and so the telco may do best to sit tight and let it happen, Johnson added.
Ovum analyst Nicole McCormick said, he doesn't "view Optus as evenly matched with Telstra, which has a clear network, connection and revenue share lead. But Optus continues to play the 'alternative' operator strategy effectively, and should fare well over the next 12 months in part because Vodafone expects continued customer losses in this time."
He said, "Optus produced an acceptable set of results for mobile for [the quarter], holding its ground in the market."
With spectrum Optus has from the acquisition of Vividwireless and Unwired, it has "the spectrum that could ensure they are the lowest cost provider, enabling a disruptive position," Coughlan said. That position would last until carriers gain access to Digital Dividend spectrum on 1 January 2015, he said. "However, I think they would be reticent to go down this path."
Optus continues to have fewer customers than Telstra but is comfortably ahead of Vodafone Hutchison Australia. Optus said it ended the last quarter with 9.5 million mobile customers. According to other recently reported results, Telstra has 13.8 million mobile customers and Vodafone has 6.8 million customers.
Similarly, Optus total revenue declined 3.2 per cent in the quarter to $2.2 billion. In comparison, Telstra total revenue is on the rise and currently sits at $25.4 billion, while Vodafone revenue has plummeted to $1.04 billion.
All three telcos are investing billions to win customers by upgrading their networks to 4G LTE. After Telstra's largely positive FY2012, analysts predicted the number one carrier likely would remain dominant.
"The Optus results were a bit of a disappointment, but reflect the predictions we made back in 2009 when Telstra announced its $1 billion 'Project New' aimed at winning back customers," said BuddeComm analyst Paul Budde.
Before Telstra's campaign to reduce prices, Optus and Vodafone "showed themselves to be real competitors," Budde said. "Unfortunately, Vodafone couldn't cope with its success and was clearly not well prepared for the massive increase in mobile broadband capacity requirements, hence its network problems." In the end, "Vodafone and Optus paid the price for Telstra's aggressive competition and that shows up very clearly in the Optus results."
Telstra's campaign has brought in new customers but the telco's "growth has come at the cost of profitability" and lower average revenue per customer, Budde said. As a result, Telstra is increasing prices, which may give Optus and Vodafone opportunity to compete, he said. "But again this will concentrate around price -- mobile is a commodity -- so any new growth will face the squeeze on margins."
Mobile operators's success is increasingly driven by what smartphone manufacturers produce, Budde added. "Optus and Vodafone are in particular affected by this as they depend heavily on mobile comms. Telstra has a bit more room to explore other revenue streams."
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