2010 Australia - Telecoms Industry - Statistics and Forecasts

Market to grow to $80 billion by 2020

The Australian telecommunications industry is preparing itself for the National Broadband Network. While it will be several years before the full impact of the NBN is felt, it will also take several years to change the industry around. Companies will have to reorganise themselves along new markets such as infrastructure and construction; middleware such as data centres, content hosting, cloud computing, OSS/BSS; and retail.

This reorganisation and repositioning is already noticeable in current market activities, where the focus is moving from ARPU to market share. Prices in mobile and fixed broadband have dropped significantly during 2010 as operators try to win as many customers as possible. These customer bases are becoming very valuable and more companies will want to do business with their customers through digital services. The telcos and ISPS are positioning themselves as attractive partners for such developments.

The NBN will become the predominant infrastructure, and as a utilities-based network it will also provide its services to other sectors, such as healthcare, education and business. With these sectors involved the industry will develop specific new business models around infrastructure, ICT and retail.

Telcos will have to decide where they want to play. Infrastructure will largely move to NBN Co and its contractors (eg, Telstra). Companies also have the opportunity to become the ICT providers to those other sectors. The larger sectors, in particular, will create a sizeable demand for value-added infrastructure services. The first of such contracts, signed in the healthcare industry, offers a glimpse of the future.

All of this will assist the industry to double its size to around $80 billion by 2020.

Declining traditional revenue

The total telecoms service market is segmented according to major provider (Telstra, Optus VHA and other providers). Detailed revenue and forecasting statistics and analyses are also included, separately, for Telstra, Optus and VHA.

Telstra still dominates the overall Australian telecom market, with more than 60% market share of overall revenues in 2009/10. However, Telstra’s annual results for 2010 showed declining revenue in most segments, and this is expected to drop further during 2011 and perhaps into 2012.

The total telecoms service market is segmented according to telecommunications service: local access, mobile and data/broadband revenues. Detailed revenue and forecasting statistics and analyses are also included, separately, for the wholesale, mobile, data and broadband markets, with forecasts for 2011/12.

PSTN revenues (fixed-line voice and local access revenues), continue on a downward spiral for all the telcos, while the data market has now overtaken the mobile sector as the main driver of growth, driven by the retail broadband sector.

Telecommunications regulatory reform will feature prominently during 2011, once the effects of the election settle down.

Fixed-line voice is declining in the second-tier market at an even faster rate than in the first-tier market – by more than 11% in 2008/09 and more than 8% in 2009/10. Falling revenue reflects increased bundle value, as well as consumers moving away from fixed-line voice services. However it may also be a symptom of increased reliance on VoIP-based platforms (such as iiNet’s successful BoB promotion) for voice service provision in the second-tier market. Revenues in second-tier mobile services and data services (including Internet access) continue to show satisfactory growth.

Broadband market

We also present an overview of key statistics and trends in the Australian Internet and broadband market, including Internet subscribers segmented by geographical area and type of Internet access technology. The publication also provides market share and access revenue statistics. We provide segmentation by dial-up/broadband and include statistics on website usage.

We show surveys by government departments, including the Australian Bureau of Statistics (ABS). We also give an overview of new trends and technology which are evolving from, and merging with, the Internet sector. A summary of a report from the ABS examines household and business usage of Internet and broadband access. An overview of the ISP market, including the number of ISPs and market trends, is also included.

Though there are more than 600 Internet service providers in Australia, the retail fixed broadband market is dominated by a small number of companies. Telstra supplies nearly 43% of services and has more than four times as many retail subscribers as the second-largest player, Optus, which has around 11% of the market. iiNet and TPG each hold around 8% of the market, and Primus holds an estimated 6%. The remaining 24% of the market is shared between the 600-plus small and medium-sized providers.

Consolidation has taken place in the retail ISP market, with a number of mergers in the last two years. The most notable of these deals was between iiNet and Westnet, between TPG, Soul and Chariot Internet along with TPG and Pipe Networks; and in early 2010 iiNet also acquired Melbourne-based ISP Netspace.

Of critical importance to ISPs is the decision as to whether to further invest in DSLAM infrastructure as the fibre optic-based national broadband network is built. A flattening of the investments started to occur in late 2009, early 2010. In the longer term, the NBN may render this investment obsolete as subscribers migrate to the fibre network.

Residential and business market statistics

The business market has been quick to embrace broadband and by 2009 the vast majority of the business sector had made the transition. Further growth is continuing in 2010 and 2011. As business users gradually move to faster broadband access via ADSL2+ (and, eventually, to services from the fibre-based NBN) they are increasingly embracing new broadband applications.

This publication provides a detailed overview of the key drivers and trends behind broadband adoption in the Australian business market. New data for 2010 has been included. A number of market surveys are also included across a wide range of topics, including e-business, broadband usage, IT and consumer satisfaction, and the farming sector.

Insights into a range of topics covering the usage of Internet and broadband services in the residential sector are also provided, as well as overall statistics of the residential telecoms market. We include BuddeComm estimates of the market in 2010 and data from a number of market surveys covering consumer usage and behavioural patterns, as well as Internet and broadband usage statistics.

In the publication we provide an analysis of the drivers behind Internet adoption among Australian households. Surveys covered include a statistical overview from the ABS regarding computer and Internet usage among Australian households, which incorporates a breakdown analysis of residential computer and Internet usage by a wide range of criteria. The figures used here are the latest available but some statistics are not due for update until late 2010 or 2011.

Mobile communications market

Total mobile services revenue earned by the major mobile operators in the 2010 financial year continued to grow, but at a slower rate than the growth seen in 2008/09. This may reflect price competition from the merged Vodafone/Hutchison business. The industry as a whole earned around $15 billion in revenue from mobile services – a growth rate of nearly 7% year-on-year. Mobile services now represent considerably more than 50% of overall industry revenues in Australia.

Between 2010 and 2012 revenue growth is expected to be influenced by the following three major factors:

• the broader economic environment is perhaps the largest influence, and economic growth in 2011 and 2012 could well be subdued in Australia;
• revenue growth will also be impacted because of price competition, especially in light of the merger between Vodafone and Hutchison (3) in Australia to form VHA;
• the extent to which new telephony services are developed will influence the pace of revenue growth.

However, it is also possible that strong adoption of new smartphones and data devices (Apple’s iPhone, which has sparked device competition in the smartphone market, and the iPad device) could drive continued growth, particularly in data services, and this may offset other factors.

We provide analysis of high-level revenue, market shares and revenue growth, as well as revenue earned from mobile voice and mobile data services. In addition, it includes selected additional statistical data relating to prepaid and postpaid revenue and average revenue per user for mobile voice and data services.

Growth is being driven by population increases and a rise in the number of people using two mobile subscriptions – one for personal use and one for business use. Australian operators are likely to have more than 25 million mobile subscribers in 2011 as migration and business adoption continue to drive growth. In 2009 growth in the number of services was boosted by the effective use of economic stimulus. Telstra continues to dominate the market with more than 10 million subscribers, Optus has around eight million subscribers, and VHA has roughly seven million subscribers.

The publication provides statistics and forecasts for 2010 as well as high-level commentary on the overall market, market shares by operator and detail of 2G and 3G and prepaid and postpaid usage.

In 2009 growth continued across a range of platforms and technologies with the use of 3G mobile and wireless broadband services growing by 162%.

The 3G mobile broadband market has hit the ground running. Over the past year Australians continued to adopt new communication and media services and adapt their usage patterns to meet their specific lifestyle needs. Services such as 3G, Voice over Internet Protocol (VoIP) and wireless broadband Internet are increasingly being used, with factors such as lifestyle, age and family-type shaping these choices.

However the fixed wireless market is showing only modest growth. Operators such as Unwired and BigAir are currently using pre-WiMAX proprietary wireless broadband technology, and have been patiently waiting for several years to make the transition to WiMAX technology. But constant delays have postponed the launch and it appears that WiMAX has bitten the dust, leaving operators to develop in niche markets only. By 2018 only 10% of mobile revenues will come from mobile voice, and that will be based on VoIP.

Market highlights:

• Telstra still dominates the overall Australian telecommunications market with more than 60% market share of overall revenues in 2009/10.
• PSTN revenues (fixed-line voice and local access revenues), continue on a downward spiral for all the telcos.
• The fixed-line voice market is declining in the second-tier market at an even faster rate than the first-tier market – by more than 11% in 2008/09 and more than 8% in 2009/10.
• The Australian telecommunications market will change dramatically over the next ten years. Accelerated by government policies these changes will be driven by a total overhaul of the industry.
• The rapid growth in wireless mobile broadband subscribers has kept the overall growth in the broadband market up in recent years, although numbers came from a very low base. Rapid growth in this area will continue throughout 2010 as ADSL growth slows down further.
• The market share of the major fixed broadband service providers is likely to remain steady in 2010, as the fibre network will take some time to roll out.
• By 2009 broadband had been adopted by the vast majority of the business sector, which now spends over $6.4 billion on data services, with an annual growth rate of between 10% and 15%.
• The residential market grew 50% faster than the business market. Obviously business spend has also increased but, from representing 75% of the total telecoms market in the 1990s, it has now dropped to just under 60%.
• In the 2010 financial year Telstra’s mobile service revenue passed $6.4 billion, with Optus at $4.7 billion. VHA, the entity created with the merger of Vodafone and Hutchison, generated revenue close to $4 billion.
• There are significantly more mobile services than people in Australia. Growth is likely to continue in the foreseeable future despite subscriber penetration rates being between 110% and 115% of the population, although the overall rate of growth may slow slightly.
• During 2010 BuddeComm predicts that the total mobile broadband market will generate $2.4 billion worth of revenues, the vast majority of which will be accounted for by 3G mobile broadband revenues. 

Data in this report is the latest available at the time of preparation and may not be for the current year.