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SingTel to Rejoin Telstra Mobile Fight as Optus Sales Fall 14%

Singapore Telecommunications Ltd. (ST) will renew a push to win mobile users against Telstra Corp. (TLS) in Australia after currency moves and a focus on profitability drove its quarterly sales in the country down 14 percent.

“We see a very exciting opportunity for us to regain market share,” Kevin Russell, country chief of SingTel’s Australian unit, Optus, said on a call after the company reported earnings today.

Telstra is buying spectrum in its push for greater dominance in Australia’s A$24 billion ($21 billion) mobile market as it prepares to hand over more-profitable fixed lines to a national fiber network. Optus, responsible for more than half of SingTel’s revenue, is moving away from a strategy that has seen it focus on boosting margins over sales for at least the past year.

Optus needs to “start addressing their revenue challenges,” Sachin Gupta, an analyst at Nomura Holdings Inc., said by phone from Singapore. “It’s not easy gaining customers. Telstra’s networks are actually very hard to match.”

Optus signed up a net 22,000 mobile subscribers in 2012 and 2013, trailing the 2.5 million added by Telstra, Australia’s largest phone company, according to data compiled by Bloomberg.

Higher Dividend

In the three years through June, Telstra increased its share of Australia’s mobile market to 49 percent from about 41 percent, according to government and company data. Optus’s share fell to 31 percent from 33 percent, and third-placed Vodafone Hutchison Australia Pty. slipped to 19 percent from 29 percent.

Telstra rose 0.8 percent to A$5.15 in Sydney trading. SingTel climbed 1.4 percent to S$3.56 as of 1:52 p.m. in Singapore.

Telstra increased its dividend for the first time in nine years today, by half an Australian cent to 14.5 cents, as it reported net income rose 9.2 percent to A$1.7 billion in the first half ended December. Revenue climbed 3.6 percent to A$12.6 billion, with sales in the domestic mobile division gaining 6.4 percent to A$4.86 billion.

The company’s domestic mobile-phone subscribers increased by 739,000 in the six months through December, for a total of 15.7 million subscribers.

Good Margins

Its operating profit margin of 24 percent is the third-highest among phone companies with revenues greater than $10 billion serving primarily developed markets, data compiled by Bloomberg show. That compares with SingTel’s 17 percent.

“Good margins always attract competitors,” Mark McDonnell, an analyst at BBY Ltd. in Sydney, said by phone. “If Vodafone and Optus were to compete more effectively across the same range of services Telstra offers, we would see a more competitive market.”

Telstra has committed to spending A$2.4 billion over two years on its mobile network, as it prepares to hand parts of the fixed-line unit to government-backed NBN Co. The moves will transform the company from the nation’s biggest seller of wholesale phone and data services to its largest consumer.

“Long may competition be rich and vibrant, but we’re well prepared,” Telstra Chief Executive Officer David Thodey told an investor call today.

Lower Costs

SingTel’s net income climbed 5.4 percent from a year earlier to S$872 million ($688 million) in the three months ended December as the operator cut costs. Sales fell 7.3 percent to S$4.3 billion.

Cost reductions helped Optus’s profit rise 41 percent to A$227 million. Sales fell 5 percent to A$2.16 billion and were down 14 percent after converting to Singapore dollars. The Australian dollar weakened 9 percent against its Singapore counterpart during the quarter, SingTel said.

Optus increased its earnings before interest, taxes, depreciation and amortization margin by 3.9 percentage points to 29 percent in the third quarter. The carrier doesn’t break out the margin for its mobile unit.

Optus’s mobile customer numbers dropped 102,000 in the quarter, the fastest pace in at least six years, to 9.4 million.

“Telstra is taking share in most of its markets,” Theo Maas, a partner at Arnhem Investment Management Pty in Sydney, said by phone before the results. “Their competitors have dropped the ball.”

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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