A businessman checks his mobile phone as the sun filters through a Sydney park August 4, 2014. Telstra Corp. Ltd, Australia's largest telco, reported a 14.3 percent rise in annual net profit on August 14, 2014, beating analyst expectations, and announced an A$1 billion ($930.1 million) share buyback. Picture taken August 4, 2014. REUTERS/David Gray (AUSTRALIA - Tags: BUSINESS TELECOMS)
While competitor telcos in the Australian market Optus and Vodafone have suffered hemorrhages in customer numbers, it is the other way for Telstra which reported on Thursday, Aug 14, the addition of one million new subscribers in the past 12 months.
The new subscribers brings to 16 million the total number of subscribers of Telstra, more than the combined customers of Optus at 9.4 million and Vodafone Australia at 5.2 million.
The two telcos saw millions of customers cancel their subscriptions because of outages that hit Optus and Vodafone. As a result, the two telcos have invested heavily in infrastructure in a bid to offer better service and entice mobile phone and internet subscribers to return to the company.
"It is difficult for Optus and Vodafone, who both have offshore parents who have to look at their best use of capital in a global sense, to allocate the necessary capital to complete in the domestic market. That provides Telstra with an ongoing tailwind that I think is difficult in the short term to negate if you're Optus and Vodafone," said Tim Carlton, principal and portfolio manager of Auscap Asset Management.
Telco experts added that Optus and Vodafone are losing subscribers at a slower rate, but even Telstra's addition of new subscribers in the second half of the 2014 financial year had also slowed down due to tougher competition and general slow down of the market.
As the competition becomes more intense, the telcos recognise that additional subscribers would require better facilities to avert outages as well as provide faster speeds. These can only be achieved by infrastructure upgrade.
Thus, for the current financial year, Telstra would spend $1 billion on its mobile network, while Optus plans to spend $1.2 billion also on its network.
However, Optus has a lot of catching up to do when it comes to customer retention and revenue growth, said Nomura analyst Sachin Gupta, who added, "Optus is focusing a lot more on closing the network-customer gap and recent trends have improved a bit, but Telstra is still has an edge on ubiquitous coverage and branding."
Meanwhile, because of Telstra's good performance, the telco announced a $1 billion share buy-back and higher dividend to 15c fully franked from 14.5c for the first six months of 2014. It brought total dividend payments for the year to 29.5c, higher than the 28c per share for the past few years.