Optus CEO urges “level playing field” for telcos

Optus shifts its focus to sustainable profit and away from subscriber acquisition in response to industry profit decline

Optus CEO, Paul O’Sullivan, has urged regulators to promote a “level playing field” in mobile, the NBN and other areas.

Optus reported somewhat negative mobile results earlier in the day. Analysts responded that Optus is doing fine as the second-place telco to Telstra in Australia.

Low mobile profits reported by the top three mobile operators show Australia's telecom industry is “in transition” and “experiencing a period of significant value erosion,” O’Sullivan said. Service revenue is down across the industry, and over the last two years industry profitability has declined significantly, he said.

In response, Optus has shifted focus to “sustainable profit growth," with an increased emphasis on retaining and increasing revenue from existing customers, he said. “The game is no longer about raw subscriber acquisition.”

Optus said its revenue was down in part due to reduction of mobile call termination rates by the Australian Competition and Consumer Commission (ACCC). The drop from 9 cents to 6 cents per minute significantly reduced revenue. However, the impact on EBITDA was “minimal because we procured… traffic cost savings as consequence of the lower price,” said Optus consumer group CFO, Murray King. Vodafone has complained that the ACCC's decision to cut rates favours Telstra.

O’Sullivan said he’s concerned about the role of content going forward. “As you level the playing field around access arrangements for fixed networks in Australia, all of us will likely be delivering video and content service on both mobile and fixed,” he said. “It’s important that those with deeper pockets don’t get a chance to lock up content.” The Optus executive urged “an open access market for content, where all the carriers are able to access content at an equivalent price from a wholesale provider.”

An explosion of data usage around the world has forced SingTel to rethink its data plans and move away from the idea of unlimited data, said SingTel Group CEO, Chua Sock Koong. She said that 15 per cent of SingTel customers now generate 85 per cent of traffic. The telco has moved to tier pricing so that light users aren’t forced to subsidize heavy users, she said.

“When the 3G networks were first built and completed, there were very few applications and actually until the event of smartphones, mobile data was actually relatively low,” she said. Carriers could offer more data for less money because they didn’t expect users to actually go through their allowance, she said. “Now with the rapid growth of mobile data… we are all very conscious that the data allowances that we provide could actually get used.”

Optus would like to get early access to 700MHz Digital Dividend spectrum, O’Sullivan said. Under the current plan, the spectrum will become available in 2015 when broadcasters switch off analog broadcasts. “We’re working with the various authorities to look at the potential for it.”

O’Sullivan said Optus will speedily move broadband customers to the NBN. “The key driver for us in terms of migrating traffic is the pace at which the NBN actually rolls out into our territories and areas,” he said. Optus has “an incentive to migrate quickly and aggressively and we will be taking all steps to do that.”

Government should ensure the NBN is run in an “open access way where everybody is starting from the same basic ground rules and we all compete on a level playing field,” O’Sullivan said. “In that sense, the biggest concern is how the large-scale payments that Telstra will receive for the NBN are applied and to make sure there is not a significant cross subsidy."

Optus supports revised rules under the Telecommunications Consumer Protection (TCP) code, O’Sullivan said. The code, which takes effect this September, aims to protect customers from unexpected charges, sort out confusing mobile plans and improve handling of customer complaints.

“We’re not expecting a negative impact on revenue” as a result of the revised code, O’Sullivan said. Optus had already begun making changes to address problems targeted by the code, he said. “While there will be some operational changes that are required, [and] while in some case this may make it slightly more complicated for us to do business, nevertheless the fact that it’s going to lift customer standards we see as a positive.”

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