This report provides overviews, analyses and statistics on the key Australian telcos Telstra, Optus and Vodafone Australia.
The 2nd Tier Telcos are covered in a separate report - Australia - Telco Company Profiles - 2nd Tier
Researchers:- Paul Budde, Henry Lancaster, Phil Harpur
Current publication date:- October 2016 (22nd Edition)
The overall telecoms services revenue reached over $40 billion in 2016, a growth of 2.0% for the 12 months to June 2016. The overall market is predicted to grow more strongly in 2017. The strongest growth is coming from the second tier providers, which grew at over 10% during that time period. The market incumbent Telstra still dominates the local telco landscape with well over 50% market share, however this market share is gradually declining.
Prices for fixed-line and mobile voice services are being driven down by competition among operators, and by consumer reluctance to tolerate price increases, which engenders higher churn to other providers. Thus opportunities to drive revenue growth through higher consumer and business spend in the short term are limited to mobile data services. The capabilities and geographic reach of these services has improved markedly within the last few years. Telstra and Optus aim to provide 98% population coverage with networks based on Long-term Evolution (LTE) technologies by the end of 2016.
Telstra is Australia’s largest telecommunications provider offering a full range of telecom services throughout Australia. The company provides basic access services to most homes and businesses, local and long-distance telephone call services, and mobile and internet services. Wholesale services are also provided to ISPs and RSPs while advertising and subscription television services are provided through subsidiary companies. Several strategic investments undertaken have strengthened Telstra’s position in the e-health services market. In total, over three years to June 2017 Telstra expects to have invest more than $5 billion into Telstra’s mobile network. Telstra will start rapidly deploying the next generation of LTE technology including voice over LTE, LTE broadcast and the next stage of LTE advanced delivering peak network speeds of up to 600 Mb/s.Telstra continues to expand into emerging technology areas such as e-Health. Telstra has recently completed 15 acquisitions and partnerships in electronic prescriptions, remote diagnostics, secure health record keeping and telematics. In August 2016 Telstra committed to invest up to an extra $3 billion over three years on major customer-focused investments in its networks of the future and digitisation. Telstra’s capex to sales ratio in each of the next three financial years would increase to approximately 18 per cent, the highest since 2008-09 as Telstra was building up its 3G network. The investment program would be progressively confirmed during FY17 to FY19.
Telstra’s score card is one of the best in the world among incumbent telecommunications companies. It is not only financial strong, it is also well-positioned to increase its business in the emerging digital, sharing and networking economy. It is successfully transforming itself into a full services ICT company. The traditional telecoms market is still out there, and it still brings in large volumes of cash, but the new telecoms business is happening outside those traditional products and services. Back in 2010 we predicted that the overall telecoms market in Australia would double in size by 2020, to around $80 billion; and that almost all of that doubling will come from other products and services; the traditional telecoms element will largely remain the same.So if a telco company were not to change its strategy it might still be part of the original pie, but it would miss out on the new pie. Telstra is one of the few incumbent telcos that has been able to successfully maintain its share in the traditional market while at the same time laying the foundations for its participation in that new and larger pie. And it is now starting to reap the benefits of that transformation.
Optus provides a range of communications services that include mobile, national and long-distance services, local and international telephony, business network services, internet and satellite services, subscription TV and digital media services. The market position of Optus has not changed all that much over the years. It has been the number two telco in the Australian market since its inception some twenty years ago, with an overall market share hovering around the 20%-25%. Also unchanged is the fact that the majority of its market share is based on its mobile service. While Optus has been strong in the mobile market it has never been able to challenge Telstra, and during the ‘Vodafail’ period Optus has not been able to use that opportunity to significantly increase its market share.
Optus made a surprise move into one of these new markets – streaming entertainment – by purchasing the rights to the British Premium League football games. Its entry into this market received an immediate backlash from the football fans, as they were faced with the high prices Optus indicated it would charge, plus the fact that soccer fans would now need to have two subscriptions to satisfy their football interests – one for the Optus UK league service and one for Foxtel for all the other football games. While there are a lot of interesting new developments in the various telecoms markets Optus operates in, as yet it is unclear if, how, and when the company will participate in these.
Vodafone Australia is in the process of making a remarkable turnaround in its fortunes. There have been several low points in recent years, all stemming from a disastrous meltdown in late 2010 caused by a poorly managed integration of the Vodafone and 3 networks and systems. This resulted in customers haemorrhaging away from the company, a process that was relentless for many quarters in succession. The loss of subscribers in turn resulted in reduced revenue and greater difficulty in developing an effective investment strategy to overcome the company’s problems. This sorry state of affairs also placed increasing strain on the two shareholders, Hutchison and Vodafone Group.
The infrastructure has seen a fundamental overhaul, largely due to the successful refarming of its 850MHz concessions which allowed it to convert 3G to LTE across the country. To some degree this process lessened the disadvantage which Vodafone suffered for not having bid for 700MHz spectrum in 2013, an asset which both Telstra and Optus, as concession holders, have been able to utilise since early 2015 to expand and improve on their LTE services. In a sign of its renewed confidence, however, Vodafone in May 2016 offered to pay the government $594 million for an unsold 2x10MHz block of 700MHz spectrum.
In August 2016 Vodafone Australia began committing major resources to evaluating a potential fixed-line play over NBN. It is also targeting leadership in the next generation of mobile, announcing that it will start running 5G lab trials and demonstrations. Vodafone Australia is also looking to take leadership in the growing Internet of Things space, drawing on the expertise of the Vodafone Group globally.
Number of pages 92
Last updated 25 Oct 2016
Lead Analyst: Paul Budde
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