Australia Telecommunications Report Q1 2014
The Australian telecommunications industry is one of the highest value markets in Asia Pacific and even the world, underpinned by high incomes and strong uptake of higher value services such as broadband and smartphone handsets. However, subscription growth opportunities are severely limited in the years ahead due to the highly saturated nature of the market. Operators are increasingly focused on value generation strategies, although the ARPU downtrend demonstrates this has yet to pay off dramatically. However, the market is currently seeing high levels of investment in next generation broadband technologies which we believe will buoy ARPUs throughout 2013.
- Australian mobile operators saw mixed performances in 2012, ending the year with 30.567mn subscriptions. By Q213, BMI data show this figure had edged up to 30.633mn. Telstra continues to gain significant net additions at the expense of Vodafone Hutchison Australia (VHA).
- The auction of 700MHz digital dividend spectrum in May 2013 has encouraged the spread of LTE and value-added services; however, we expect strong competition and a deteriorating economy to apply downward pressure on ARPUs.
- We forecast Australia's broadband industry to receive a boost in the latter part of our forecast period when the National Broadband Network (NBN) and LTE services are widely available. The coalition's alternative NBN plan announced in April 2013 may bring this boost forward as it aims for a faster roll-out.
Key Trends And Developments
The controversial AUD37.4bn (US$36.7bn) National Broadband Network (NBN) project was thrown into disarray in September 2013, when the entire board of the state-owned NBN Co reportedly offered to resign, in response to a proposal by the new Minister of Communications, Malcolm Turnbull, to replace the previously-planned fibre-to-the-home (FTTH) technology with fibre-to-the-node (FTTN).
Turnbull belongs to the recently-elected Liberal-National Coalition (LNC), which has opted for an alternative NBN to that favoured by the outgoing Australian Labor Party (ALP). While the ALP proposed covering 93% of Australian premises with FTTH by mid-2021, the LNC plans rely on FTTN and the existing ageing copper network to serve about 70% of premises, with FTTP accounting for just 22%.
Consequently, while the ALP's NBN aimed to deliver minimum download speeds of about 100Mbps, the coalition's version would offer download speeds of 25-100Mbps by end-2016 and 50-100Mbps by 2019. In essence, the aim is to deliver a cheaper NBN to Australia in a shorter timeframe, although the trade-off would be in the form of slower connectivity. BMI has long contended that Turnbull's plan would be inadequate for future broadband demands, and additional investment will eventually be needed to replace the ageing copper last mile with FTTH fibres. If we factor in the strong possibility that FTTN technology could be obsolete by the time contract renegotiations have completed, the resulting costs could be higher than had originally been planned by the Labor government.
Elsewhere, in the mobile market, there have been a number of new developments. In September 2013, Vodafone Hutchison Australia (VHA) announced the closure of its 3 mobile brand, with the last remaining customers having been disconnected at midnight on August 30, and either transferred to the Vodafone Australia network or to another provider. These customers will be given six months to port their existing numbers. The move, which also pushed Kogan Mobile into discontinuing its services, resulted in 120,000 customers moving to a new provider.
In October 2013 Telstra finished the world's first LTE Broadcast session on its commercial LTE network. The LTE Broadcast enables the user to send content simultaneously to a large number of devices in a target area. The equipment, provided by Ericsson, allowed different devices to receive different video feeds. The devices were able to receive a large file using the single LTE Broadcast channel. Different subscribers can now receive unique, individual content concurrently.
In November 2013, it was reported that Optus will begin testing home wireless broadband services for 200 Optus staff across Sydney, Melbourne, Brisbane and Adelaide. The three-month trial will give Optus staff a modem for their home, to be used as an alternative to their fixed broadband service. The trial will test network compatibility, user-friendliness and performance. Optus will be able to offer dedicated bandwidth for fixed wireless services through Optus' multiband 4G Plus.
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