Optus splurges despite loss

OPTUS has suffered a hefty drop in full-year profit as content costs and competition weigh on earnings but the second ranked telco has flagged a $1.5 billion boost to its network spending after a favourable decision from regulators on roaming charges.

Optus says it will spend $1.5 billion over the next year to improve the capacity and coverage of its mobile network, mainly in regional Australia, after the competition watchdog decided not to change rules governing what mobile operators can charge rivals to access their networks.

The spending pledge came yesterday as Optus reported a 11.8 per cent drop in full-year profit to $794 million.

Revenue and earnings for the 12 months to March 31 were hit by tougher competition in the business market, discounting on handsets and greater content costs arising from the 2016 purchase of rights to show the English Premier League.

The $189 million purchase was part of a multi-million dollar spend on content as Optus aims to protect and grow its subscriber base but profits have declined in the wake of the EPL acquisition.

Optus said a regulatory cut to mobile termination rates also bit into profits. At the end of March Optus’s 4G network reached 96.1 per cent of Australians and CEO Allen Lew said that will expand.

“Over the next 12 months we will invest another $1.5 billion,” he said. “The bulk of that $1.5 billion investment is going to go into regional Australia.”

Earlier in May the Australian Competition and Consumer Commission said it did not have enough evidence that declaring a wholesale domestic mobile roaming service would improve the current state of overall competition, particularly in regional areas. The decision at the time was a win for Telstra and Optus, which operate the biggest networks.

Mobile service revenue for the year fell 17.1 per cent to $3.87 billion. Prepaid mobile subscriber numbers rose 1.7 per cent to 3.74 million and Optus postpaid subscribers lifted 6.1 per cent to 4.95 million.

Optus said that in the fourth quarter, it had its strongest quarter of mobile handset growth in five years, gaining 78,000 postpaid and 64,000 prepaid customers.

“Despite heightened competition in the Australian market, Optus’ strategy of delivering customer growth through music, TV and sports content, underpinned by a robust and resilient mobile network, is on track,” Mr Lew said.