SYDNEY: Telstra’s unfettered grab for market share in the ultra-competitive mobile market could be petering out as the nation’s top telcos increasingly shift their focus to profitable growth and margin expansion, according to analysts.
The telco giant has dominated the mobile sector since 2010 when it dumped $1 billion worth of subsidies and price reductions to aggressively target its competitors Optus and Vodafone in a massive market shake-up.
Since that time Telstra has increased its market share in mobiles from 42 per cent in 2010 to 53 per cent in 2014, taking its total subscriber base to more than 16.5 million. The telco’s mobile division is on track to make more than $10bn in revenue this year.
In the same period Optus’s subscriber numbers have fallen to 9.4 million and Vodafone Hutchison Australia to 5.3 million as the former addresses internal cost structures and the latter was ravaged by customer defections brought on by disastrous network meltdowns.
But Citi analyst Justin Diddams has warned that Telstra’s rampant run in the mobiles market — as well as growth in the wider market — is showing signs of a slowdown after the telco giant added 477,000 new subscribers across 2014, which was up 1.6 per cent but well below a five yer average of 4 per cent.
“We expect Telstra to continue to grow revenues from its mobile business, but may find it difficult to capture additional market share,” he said.
Nomura analyst Sachin Gupta agreed, saying an increase in network investment meant telcos were increasingly looking to derive more profit from their existing bases instead of outlaying costs to acquire new customers.
“Decent networks can lead to some pricing power, reduce churn, and enhance returns, as seen with Telstra in recent years,” Mr Gupta said. “Optus will likely increase network investment too and focus more on offering integrated services, so not just price-based competition.”
The shift towards profitable growth at the expense of market share comes amid recent revamps of mobile phone plans among the nation’s leading telco providers.
Optus recently launched a new assault on Telstra’s mobile subscriber base with new plans to allow families to share data quotas. The telco’s relaunched plans came just a week after Telstra introduced sweeping changes to its mobile offers in a bid to eliminate “bill shock” for millions of its mobile customers.
Vodafone too has been updating its plans with offers of free content bundles — such as partnerships with streaming services Stan and Spotify — to entice customers away from its rivals.
Mr Diddams said while he expected Optus would also see muted growth, the No 2 mobile provider would benefit from growth in user revenue. Vodafone too is expected to grow its subscriber base from recent lows as it continues to focus on retaining its market share.
Despite the muted prospects of subscriber growth in the mobile sector, Mr Diddams noted total mobile revenues had risen 3.7 per cent in the past year, marking an end to two years of decline. On a telco-by-telco basis, Telstra’s mobile revenue grew 10 per cent, year on year, Optus was up 6 per cent and Vodafone fell 2 per cent.