Optus’ parent company Singtel has singled out Australian operations as a reason for poor performance of its global enterprise business.
In Q3 results released today Singtel told investors Optus’ revenue hit $2.39 million, a 1.1 percent year on year drop.
“Group Enterprise businesses continued to be challenging amid a cautious business environment, increased competition and continued carriage erosion. Overall operating revenue fell 4.3 percent dampened by 19 percent decline in Australia (14 percent in constant currency terms).”
“Excluding Australia, operating revenue was stable.”
So what happened here?
Singtel’s announcement says “In Australia, EBITDA declined 54percent year-on-year on lower revenue with increased competition from new entrants re-selling NBN. However, EBITDA grew 64percent from the preceding quarter driven by higher mobile and ICT revenues, as well as cost management initiatives. Optus Business’ order book improved from a quarter ago.”
“EBIT fell 26percent after including higher depreciation mainly from right-of-use assets.”
But even with those nasty numbers, things were better this quarter than last: the statement says “Against the preceding quarter, Optus Business posted higher revenue and EBITDA and its order book as at 31 December 2019 was higher than a quarter ago.”
Optus’ consumer business didn’t fare much better.
Operating revenue and EBITDA grew 1.2 percent and 10 percent respectively, thanks to “higher NBN migration revenues on increased migrations”.
But once Singtel’s accountants looked at results without NBN migration, “operating revenue and EBITDA declined 8.1 percent and 22 percent respectively. The decreases were due to declines in mobile service revenue and equipment sales, impacted by price increases in prior quarters and launch of Optus Choice plans this quarter. Retail Fixed margins were also lower from increased traffic costs and a higher NBN customer mix.”
Australia even copped part of the blame for poor numbers at Trustwave, the managed security services company Singtel acquired in 2015. Trustwave acquired Melbourne security consultancy Hivint in 2018 and Singtel now says “Negative EBITDA increased due mainly to accruals of staff earnout payments from the acquisition in Australia and increase in stock option expenses.”
Australia did provide some good news to the group. Singtel noted it had over 400 5G fixed wireless sites in Australia as at 31 December 2019.
Optus’ NBN customer base grew by 254,000 customers from a year ago and fixed retail revenue grew 46percent. Mobile customers increased by 229,000 services, including 57,000 new postpaid mobile services and 157,000 prepaid mobile services.
Optus CEO Allen Lew described the quarter as “transitional” and attributed softness to business adjustments due to “increasing customer demand for SIM-only plans.” He said Optus’ new customisable mobile plans should perk things up in future.