Optus Business trips on government deals

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Optus Business trips on government deals

Optus's enterprise business has continued to cop it from all sides as external factors dragged down its revenue and earnings in the 2019 financial year.

Optus Business is typically a standout performer among parent company Singtel's annual financial results, though nagging issues like eroding margins continued to be a detriment to enterprise sales.

ICT and managed services, the largest segment within Optus Business, grew sales by just half-a-percent to $634 million. However, the segment shed $3 million in revenue in the last quarter to 31 March 2019 to $150 million, which was pinned on large one-off sales in the same quarter last year.

Data and IP similarly dipped 3.9 percent to $300 million due to price erosion and lower volumes.

Mobile revenue took a 9.9 percent hit in the last quarter, but rose by 1.4 percent overall to $266 million. Optus blamed lower equipment sales and the pricing impact on messaging and roaming, due in part to the ACCC's decision in 2016 to cut mobile termination rates.

Voice revenue took the biggest tumble of 12.4 percent to $243 million, which Optus blamed on customers switching to lower cost IP-based solutions like WhatsApp or Skype for Business.

Overall, Optus Business' revenue slid 2.7 percent to $1.44 billion, shedding $40 million compared to last year. The biggest pain point was a significant slowdown in customers spending from key government and financial sectors delaying contract awards, possibly due to the NSW state election in March and upcoming federal election this weekend.

EBITDA also took a hit, down 14.8 percent to $216 million.

The telco picked out a few highlights from the year such as winning a five-year contract with Coles in March to provide enterprise network services to more than 2400 stores. Optus Business was also named Cisco's first Australian telco partner for Broad Cloud Calling, which will be offered from Optus Cloud next month.

As for Optus's overall business, revenue grew 5.7 percent to just over $9 billion thanks to customer growth and higher equipment sales. EBITDA was down by less than a percent though to $2.7 billion. As usual, Optus blamed its eroding earnings on the NBN, in particular the organisations decision to temporarily suspend NBN HFC migrations in November 2017.

Other issues included higher depreciation and amortisation costs, as well as 'exceptional items'.

“Optus achieved a very strong performance in the fourth quarter underpinned by a relentless focus on delivering exceptional network and customer value to drive customer growth and engagement,” said chief executive Allen Lew.

Lew also highlighted that the telco is gearing up to launch its commercial broadband service later this year.

“Optus is scaling its 5G network in preparation for a broader commercial launch later this year which will start to see this exciting next generation technology in the homes and hands of our customers.”

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