Oonagh Reidy

Singtel Optus refuses to decide on NBN until rival Telstra confirms its game plan.


The Telstra NBN deal which is rumoured to be announced publicly later this week, will see the terms under which the Telco agrees to sell off its fibre network and other possible broadband contracts made available to it from the National Broadband Network, following the sale.

It will also decide how Australia’s largest Telco will gain financially, which in terms of cash flow could put it in a far superior place than rivals, although Telstra are said to be keen to see its biggest competitor jump on the NBN train sooner rather than later to create a level playing field.    

Getting Optus on-board is also said to be important to the NBN both financially and in terms of garnering support from the wider Telco community and other critics of the long awaited plan, according to the Australian Financial Review.     

The big question to be decided  is whether Australia’s second largest Telco will keep its own network, which analysts say could hamper the NBN’s business model considering the Telco’s already large consumer base. 
 
Optus said yesterday it would hold off until Telstra’s NBN strategy is announced.

This is in spite of talks Optus were said to have had with the NBN last October over its HFC network, although no definite outcome was reached.

Telstra, who are to announce its 2010 interm financial results this Thursday, could see the company confirm its NBN strategy.

Its CEO David Thodey and NBN Chief Mike Quigley were said to have held a very productive meeting last week, in which final ends of $11 billion NBN deal were said to have been sewn up.      

Optus has around 1.6 million customers between Sydney, Melbourne and Brisbane.

The Future Fund superannuation manager – Telstra’s largest shareholder – reduced its stake in the company yesterday to 6.76% from 7.8% following the NBN rumours.

Telstra’s privatisation has allowed it to strip itself of its flakey public sector skin and has restructured the business – which is paying off quite nicely, thank you very much.

This was the message at yesterday’s financial results announcement in Sydney, where a lighter, leaner Telco was revealed by CEO David Thodey. 

Its new slimmed down business model included the axing of 300 executives from senior level, price simplification and a focus on customers – courtesy of its $1 billion investment in Project New.

The revamp which has gone hell for leather since its privatisation last year, spells the start of an intensive focus on improving an inflated, sluggish Telco into a dynamic powerhouse and a customer favourite. 

“We’re getting better as a company..but we’ve a long way to go,” admits Thodey.  

“We need to address the fundamentals to lower the cost base,” he added. 

The merging of Countrywide and Customer divisions was cited by Thodey as being a major agent of change, helping bring about a major simplification of organisation.

 “Our strategy is now bearing fruit with the encouraging sales momentum reported in the first quarter of 2010/11 continuing for the half-year.

“We are also enjoying the strongest customer momentum in over a decade, and revenue growth across our three retail segments.

“Customer satisfaction scores have improved over the half year and we are on track to achieve savings of $250 million in 2010/11. “

This billion dollar gamble is the former state-owned enterprise’s bid to stay at the top of the market as competition from Optus and Vodafone as well as new players intensifies. 

However, the drop in profits of 36 percent is sure to frustrate shareholders who are already on edge over the looming NBN deal, ahead of an EGM shareholder meeting in July, which will allow them decide the fate of the plan.

iiNet now has 1.3 subscriber services – cementing its No.2 DSL position.

And the ISP have also put up to top dog Telstra, saying “we achieved our strategic goal of becoming the leading challenger brand.”

Its revenue for the second half of last year grew by a phenomenal 45 per cent to $330 million, said CEO Michael Malone, up from $228.1 million and net profit after tax  soared 16% to $17.2 million.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) were up 25 per cent to $46.8 million.

“iiNet’s strategy, focused on retaining profitable customers, expanding its product offering and achieving scale, differentiated us from other Internet Service Providers (ISPs) and underpinned our growth, ” Mr Malone said.

Underlying EPS up 15% to 11.3 cents per share  compared to 10: 9.8 c for the previous six month period.  

Broadband customers were also up 20 per cent to 650,000 from 30 June 2010 due to “continued organic growth and the acquisition of AAPT’s Consumer Division in September 2010”.

They also attributed the rising subscriber services, which now stands at 1.3 million to the acquisition of fetchtv, as well as well received broadband packages offered to consumers including new Terabyte plans and BoB Lite.  

Interim dividend also increased 2 c – to 5 cents per share fully franked.

Mr Malone said that the results reflected the strong underlying fundamentals of iiNet’s business.

“Over the past six months, iiNet has experienced continued growth in its subscribers, even during a period of increased competition, with more than 7,000 additional broadband subscribers added in the half.

“In a more highly competitive environment, it’s very important that we’re able to retain customers and maintain our low churn levels. I am very pleased with the fact that our customer service levels continued to remain above our global best practice benchmark.

The ISP has also launched a campaign to reinforce its position as  the second largest DSL provider in Australia, launching  a new “No. 2 DSL” campaign.

With regards the looming NBN roll out, the CEO said:
“We now have greater clarity around the National Broadband Network, and the rollout is now commencing. 

“The NBN will increase the market opportunities for iiNet providing us with nationwide customer access, the potential for lower churn due to relocations, and a larger serviceable market.

“iiNet is NBN ready and ideally positioned for the change.

The ISP also said they were on track to achieve full year EBITDA guidance of $106 million.

The carrier has been voted Australia’s top broadband co – beating rivals Telstra and TPG.The ISP was given the overall highest satisfaction rate with 95 percent of their 200,000 customers stating they were “very” or “fairly” satisfied with their internationally-linked IPv6-enabled network.

This is compared to arch rivals Telstra BigPond who had 69%  satisfaction, followed by TPG at 86%, and iPrimus with 72%, although Internode had the highest rating.   

Both Optus, 3 and Vodafone recorded drops in consumer satisfaction during six months from June to November last year. 

Overall, it appears Aussies were happier with their ISPs – 73 percent were happy with their service provision, with several of the major providers recording increases in satisfaction among its consumers. 

The survey carried out by Roy Morgan research surveyed more than 6000 Australian Internet customers during the six months to November 2010.     

Earlier this month, Internode said they had enough 32-bit IPv4 address space for users to last three to five years as the Internet globally starts to runs out, saying new users will be assigned two kinds of ‘addresses’ in a parallel ‘dual stack’ arrangement.