Telstra's Mobile Business Healthy
0Overall Score

With the release of Telstra’s half year results, it’s plain to see that the company’s mobile phone business remains quite healthy despite slowing growth and increasing competition.

The major telco has reported that while its share of market revenue has fallen 1 percentage point the period, it still commands a healthy 45 per cent of all mobile phone revenues in the country.

Although competitive pricing, including call capping and response to other market pressure, has impacted the telco’s margins and the company’s competitive position in the growing but low yield pre-paid market could be better, there’s still plenty of good news.

Revenues from termination charges grew by 12 per cent to $319; subscriber numbers are still growing, with the company putting on an extra 7per cent and while voice revenues have slowed their growth (3.2%), data is taking up the slack.

Telstra pointed to wireless broadband and its Blackberry business as revenue drivers in the mobile space, but also notes that retention and cross-selling will play an important part in future numbers.

Looking to the future, the company will ultimately have to avoid the nasty looking numbers it is paying to Hutchison to access its 3G network by the time the Ericsson contract, which it signed in December is rolled out at the end of next year.

Lower operating capital expenditure for the last half was offset by increased payments associated with the deferred payment terms of the Hutchison 3G network sharing contract of $312 million, said the company.

Value added services increased by 11% or $54 million and comprised of international roaming revenue growth of 10% or $12 million due to increased outbound roaming minutes of 11% following the introduction of country specific pricing from December 2004. Contributing to this growth was the increase in inbound roaming prices charged to wholesale partners introduced during September 2004.

Mobile data revenue increased by 14% or $37 million due to growth in Short Message Service (SMS) revenue of 3.8% or $9 million resulting from a 15% increase in the number of messages sent, offset by the 1c text offer and other discounting initiatives such as Telstra Rewards and Bonus Options.

Other mobile data growth of 73% or $28 million due to increased usage of Telstra mobile broadband driven by growth in the number of services in operation and Blackberry devices resulting from offers such as $120 credit, 3 month free or 5 hour free e-mail; and Messagebank revenue increases of 5.4% or $5 million attributable to a 6.0% increase in minutes, offset by a slight reduction in yield as a result of discounting initiatives.

Wholesale mobiles grew by 46% or $5 million due to increased resale of GSM services and minutes of use.

Mobiles interconnection increased by 13% or $36 million due to the inclusion of revenue from Hutchison for roaming on the Telstra GSM network from April 2005, as well as an increase in terminating volumes for CDMA and prepaid services.

Blended average revenue per user (ARPU) declined by 4.5%, due to the higher proportion of growth in the lower yielding prepaid services. Postpaid ARPU increased by 1.0% due to increases in data revenue, but prepaid ARPU declined by 18% as a result of discounting initiatives on offer for prepaid customers. Mobile data ARPU continued to grow now representing 16% of retail mobile services revenue, an increase of 2% from the prior corresponding half year period.

Mobile handset revenue grew by 6.6% or $13 million, with the additional sales revenue associated with increased selection of postpaid GSM and CDMA phones available for ‘$0 upfront’ with a mobile repayment option, as well as the take up of a free HP printer offer in December 2005 with selected Nokia phones.