The acquisition of Dodo led to strong revenue growth for M2 Group in the first half of the financial year, according to the telco’s financial results released today.
M2 added 50,000 net services in the first half of the financial year, ending the half with 1.5 million post-paid services. As a result, revenue spiked 66 per cent year-over-year to $506 million in the period ending 31 December.
M2 Group CEO Geoff Horth said the results show “a really pleasing set of numbers that obviously been largely driven by the benefits of the acquisitions we did in FY12 and FY13”.
M2 added 39,000 broadband services in the half year and this accounted for most of the net growth in services.
“This growth has been very strongly driven by Dodo", the telco’s consumer broadband brand, said Horth. M2 also added customers across its business and wholesale broadband units, he said.
M2 said it received a “very positive response” to its low cost and unlimited NBN services that were announced in October under the Dodo brand.
The Dodo services included a $59.90 monthly unlimited plan with 12Mbps download and 1Mbps upload speeds, and a $29.90 monthly plan including 5GB on-peak and 5GB off-peak data at the same speed tier.
M2 does not differentiate between broadband and NBN connections in its numbers. However, while Horth said there are “high levels of interest” in the NBN plans, he noted that NBN still only represents a small part of M2’s total broadband customer base.
Also, M2 said it added 14 NBN points of interconnection in the half year, expanding its NBN footprint to 33 POIs nationwide.
“They are really are what we consider all of the POIs that have an appropriate addressable market,” Horth said. “It is a strategy of making sure that we’re in a POI at a point of time when there is enough customers to justify our investment.”
“We’re using the NBN very much still as a test market,” he added.
M2 said it has completed negotiation of its Telstra Wholesale agreement, executing the renewal contract for terrestrial services on 23 February. The new contract expires at the end of FY 2016.
“It is what we wanted from that agreement and very importantly, gives us a very solid operational foundation ... and obviously ensures we will stay competitive in the marketplace in the coming years,” said Horth.
M2 added 23,000 fixed voice lines in the half year, with 85 per cent of consumer voice sales bundled with broadband. Also, M2 added 13,000 energy services, but it shed 25,000 mobile services.
M2 attributed the decline in mobile services in large part to flagging sales of 3G mobile broadband. Horth predicted a turnaround following today’s launch of 4G mobile and mobile broadband plans.
“We were late coming to market with our 4G proposition,” he said. “We were deliberately late – we didn’t think the market was mature. We didn’t think that really there was a clear place within that marketplace and we didn’t think the economics made sense for us.”
With the 4G launch, Horth expects M2 will hold its current number of mobile customers in the second half and grow in future periods.
M2 said it is “creating an integrated business with clear segment and functional structure” and “rationalising systems and processes to simplify the business”.