Optus, Vodafone price cuts may trump Telstra data boost

TELSTRA’S latest move to dole out more data to mobile users at no extra charge may not be enough for the powerhouse telco in the wake of ongoing price cuts by Optus and Vodafone, according to Macquarie analysts.

Telstra boosted data caps on mid-tier plans by 2-14 gigabits while keeping pricing unchanged in July as part of its strategy to keep customers from moving to other networks.

While the data boost is promotional and only available until September 4, according to Macquarie, the promotion could become a permanent plan feature. “Telstra has been using tactical marketing to offer more value to its existing base, so in some respects this just takes that approach above the line,” Macquarie analysts said. “It will be aimed at shoring up subscriber numbers given the competitive landscape, while also being structured to prevent spin-down. It should achieve the second goal, given data inclusions at lower levels remain small relative to those offered on higher plans (and the $195 plan would have limited take-up).

“All up, the competitive dynamic remains intense, and is a cause for caution on the fiscal 2018 mobiles outlook,” the analysts added. Most of the pressure is coming from Optus, with the telco cutting the cost of its 32GB iPhone 7 plans in recent days, and continuing to offer its $130 plan for $100 (excluding handset costs) until early September.

“Notably, Optus also introduced a new $70 plan with 6GB/month, the new price point will be attractive, but its success will be dictated by whether Optus customers who take it up are doing so in place of $60 plans, or the more critical $80 plans,” Macquarie analysts said.

Macquarie has maintained its neutral rating on Telstra and with a target price of $4.45. The stock closed down 2¢ at $4.09 yesterday.