2015 Australia - Mobile Infrastructure

Australian MNOs aiming for near-national LTE coverage

Despite pressures on pricing, revenue is expected to show continued growth for fiscal 2015, though future revenue growth will be impacted by continuing activity from a number of the larger MVNOs Positive growth offsetting downward pressure on mobile voice revenue should be expected from mobile data services as the reach of LTE networks is extended into 2016. For the MNOs, the latest results are positive. Telstra reported a 9.8% increase in mobile revenue in the year to December 2014, while Optus recovered from revenue decline in FY2014, recording a 6.7% increase in FY2015. VHA, which has been dogged by steep revenue declines for a number of years on the back of customer disaffection with service offerings, reported a 2.9% increase in revenue for the first half of 2015, supported by a 2.1% increase in its subscriber base. The operator’s investments are clearly beginning to deliver rewards, resulting in a change in customer sentiments as it addresses popular concerns over poor network quality and stability.

Continuing dominance of the triopoly players

Australia’s mobile market continues to be dominated by the three major mobile network operators Telstra, Optus, and Vodafone (VHA). Voice services remain a staple for revenue for all three, though in terms of revenue share voice is steadily losing ground to various forms of mobile data, which has evolved from basic SMS messaging to encompass high-end applications including gaming and m-commerce.

To address poor mobile services in rural areas, the government in June 2015 announced the first of two Mobile Black Spot Programs, funded by the federal and state governments as well as by the two commissioned MNOs Telstra and Vodafone. The work to deploy some 500 new or upgraded base stations will start at the end of 2015 and be completed by 2018.

Infrastructure moving to 4G, with 5G on the horizon

From the mid-2000s consumers took to 3G in earnest as they migrated from 2G networks. In line with the migration of 3G, operators such as Telstra plan to discontinue 2G-based networks are repurpose spectrum, for 3G and 4G use. Nevertheless, 2G retains a use in specific areas such as M2M applications.

Just as 3G grew to dominate the mobile landscape, so is its dominance now fast fading as LTE networks gain headway and consumers migrate to the new technology. By mid-2015 Vodafone provided 90% metro population coverage with its LTE infrastructure, while both Optus and Telstra are each ramping up to 98% coverage by the end of 2016. Already, up to 80% of all new smartphones sold are LTE-capable.

Steady subscriber growth maintained

Growth in the number of mobile subscribers in Australia has slowed in recent years, reflecting the relatively high penetration rate, which by mid-2015 had reached about 137%. Although a significant proportion of subscribers make use of multiple phones or SIM cards, growth is stimulated by a steady increase in the population. Operators can also expect to benefit from further migration among consumers from fixed-line to mobile telecoms, supported by the practical benefits to consumers of improved quality of mobile data services resulting from network upgrades and the wide-scale reach of LTE infrastructure.

Spectrum policy changes to improve regional services

Following the auction of spectrum in the 700MHz band in early 2015, licensees have been able to makes use of their concessions since January 2015. This has led to a rapid extension of mobile broadband availability across most areas of the country, and involved each MNO investing more than a billion dollars annually in network upgrades. Competitive pressure among the MNOs is ensuring that more funding is being made available to upgrade these networks to 2017 at least. In addition, the government in mid-2015 released funds for its two-stage Mobile Black Spot program, while a pending licensing procedure affecting the 1800MHz band will see improved mobile services in rural regions.

Smartphone market hand-in-hand with network improvements

Smartphone use in Australia continues to grow among consumers, with the smartphone sector now accounting for about 80-90% of all new devices sold. Smartphones and tablets are becoming a dominant internet access channel among the younger demographic. In addition, these devices are beginning to dominate overall e-commerce, being used in about a third of all e-commerce transactions. This proportion will increase into 2016 in line with the availability of devices with larger screens, more mobile-friendly websites, easier payment systems and a widening availability of faster mobile networks.

Key developments:

• Vodafone switches LTE data traffic to new core network, reports 2.9% growth in revenue for the first half of 2015;
• Vodafone and Telstra prep for launch of VoLTE services;
• Telstra commits to $5 billion mobile spend over three years;
• 4G subscriber base increasing;
• Rapid growth in phablet sales impacts tablet market;
• Smartphone penetration showing sustained growth;
• Report update includes telcos’ financial and operating updates to June 2015; recent market developments.

Companies mentioned in this report:

SingTel, Vodafone, 3, VHA, Optus, Telstra, AUSTAR, unwired, Vividwireless, NBC, Optus, AAPT, Hutchinson, Walker Wireless, ActewAGL, NBN, Amaysim, Woolworths, Crazy Johns, JB HiFi, Virgin Mobile, Aldi Mobile; Huawei, Lebara, AAPT, Kogan Mobile, GRLmobile, Red Bull Mobile, Macquarie Telecom, Boost Tel, Pivotel, Globalstar.