Australia’s Optus to invest $1.4 bn to take on rival Telstra

Australia's second-biggest telecom company Optus plans to ramp up infrastructure spending in its efforts to take on Telstra to become the country's leading mobile service provider.

Optus, a subsidiary of Singapore telecom major Singtel said yesterday that it would increase capital expenditure to A$1.8 billion ($1.4 billion) to build its mobile and fixed-line networks for enhanced data coverage and performance, and to offer better customer service.

According to analysts, Optus' investment plan signals a looming battle with rival Telstra for dominance in the Australian market after years of being on the back foot. Telstra spends about A$1 billion annually to expand its mobile network and to maintain its position.

Optus chief executive officer Allen Lew told investors, "The capital expenditure for next year will focus on extending our reach. We've taken a look at where the hotspots are in terms of our mobile network and we'll be increasing the capacity there.''

"We must improve our fixed network so that customers can all have high-definition, quality streaming of video into their homes and the third major tranche of our spending will go into enhancing our back room and billing systems to enable us to have a digital-first experience with our customers so they can interact with us online much better than they can today," Lew further stated.

A potential merger of fixed-line internet rivals iiNet and TPG Telecom is expected to push Optus down to the third position. (See: iiNet accepts TPG's $1.2-bn takeover offer)

However, Lew said Optus with its over 1 million broadband customers, had a plan to deal with the situation.

"Clearly, if they get together they'll be the number two player but for us the primary focus still remains mobile," he said.

The telecom major reported an 11-per cent surge in operating revenue at A$2.3 billion for the fourth quarter ended March and a 7-per cent rise in net profit at A$239 million compared to a year ago. However, for the whole year, the results were more muted with a 4-per cent rise in revenue and a marginal 0.7 per cent increase in profit.

''In spite of intense competition in the Australian market, Optus has delivered strong EBITDA and net profit growth this quarter,'' Lew said in the earnings release.

With its popular data plans and a keen focus on customer experience, Optus won new customers and delivered strong top line growth.

Optus has around 9.43 million mobile customers at the end of the March quarter, an increase of 64,000 over the previous quarter. Fixed broadband subscribers also increased to 1.03 million from 988,000 during the period.

Optus said that demand for 4G services is strong, and it had 3.53 million customers at the end of the quarter, accounting for 37 per cent of the total mobile customer base. With its A$1.3 billion in capital spending and A$720 million in spectrum investments, Optus' 4G network reached 86 per cent of the Australian population as at the end of April.

Meanwhile, the parent company Singtel reported yesterday a 5-per cent increase in operating revenue for the quarter at S$4.3 billion ($3.3 billion), while net profit also registered a 5-per cent rise at S$939 million ($710 million).