Country Study: Comparison between two MNOs in Australia, business performances and operators’ strategies. * This short report accompanies a presentation that can be found numbered as (4/4) * A brief assignment, Course: Wireless infrastructure deployment and economics, at KTH, Stockholm, Sweden. Nov. 2014

1. Country study – comparison between two MNOs in Australia
Business performances and operators’ strategies
Ahmad J.A. Bazzari
3rd
December, 2014
 Introduction:
In this brief study about the Australian telecom market I will try to present, compare, and analyze the
market from the business perspective of two operators.
We will look at the market share in terms of subscribers and revenue as of the current situation and of
previous years in an attempt to identify a trend. Among the three MNOs we will look at the market
leader Telstra, and the second biggest Optus. Together they have around 70% of the subscriber base
and around 80% of the revenue.
 The rivals:
A. Telstra:
The market leader and the biggest operator in the country, as a result of opening the market for
competitions, Telstra has watched its market share dropping from 100% to nearly 41% (16 million) as
of mid-2014 [1,2] in a country with a population of 23.5 million [3], with a revenue share of around
53% ($9.2 billion) of the total mobile market.
Telstra is the oldest player, has built a reputation of having the most covered areas and population
percentage, currently it covers 99.5% of population in terms of mobile coverage with 85% covered
with 4G, they are proud of that, and consider it “ vitally important in terms of attracting customers’’
[4]
Telstra, believing in a prosperous future of the market has invested $1.2 billion in the 4G spectrum
auction. They believe in enhancing both coverage and capacity of their 4G network will lead to both
attracting new customers and increasing revenue derived from mobile data services [5].
Telstra is the only MNO with a positive revenue growth for the last three years, with a growth of 6% in
2014 [6,7].
Fig (1) TELSTRA – 4TH DIMENSION [6]
While Telstra has higher prices for comparable services from other MNOs, they have advantages that
still work in their favor beside the superior network and old loyal customers, such as: promising a new
smart phone every year with the two year contract, And a loyalty thanks program [10].

2. B. Optus:
The second biggest operator with around 28% of the market share in both subscriber base (around
9.46 million), and revenue ($4.24bn in the financial year of mid 2013- mid 2014) [1,2,7,12].
Optus, in order to compete with Telstra has identified that the main advantage of Telstra is their
superior coverage and network performance. Therefore; they are working hard to minimize this gap
in order to attract customers who naturally would choose Telstra over Optus for such reasons, and to
do that, they were the only other MNO in the spectrum auction spending $649 million to acquire
precious spectrum required for upgrading and expanding their 4G network. Optus now promises to
cover 90% of the Australian population with 4G by April 2015 [8,9] in a same strategy as of Telstra
to derive more revenue from data services.
Another approach to compete with Telstra is by the traditional way of offering lower prices, wider
flexible services and easy to understand plans (by introducing minutes instead of caps [10], and
more than 2/3 of the country MVNOs use the Optus network [11]. Moreover; it is worth mentioning
that Optus acquired a successful MNVO (Virgin) back in 2006 as part of their strategy to compete
more aggressively [13].
Unlike Telstra, the yearly revenue growth shows negative values [12].
 Business performance:
Now we will look more deeply into the performance and strategies of both operators.
Market and spectrum:
Fig (2) Market share: Subscribers and revenue as of Mid-2014
As for the spectrum (detailed figure in report number 1), Telstra holds 2x148.4 MHz, while Optus has
2x68.4 MHz.
Revenue growth:
By having a look at the revenue market share in the last three years, we can notice that while Optus
experiences almost flat percentage over the years with slight declining, Telstra is impressively expanding
their share from around 45% to around 54% [7]. This can partly be explained by the unsatisfied customers
leaving a failed operator (Vodafone) in 2011 due to severe network performance issues [14]. Telstra, as the
operator with the best network was the first choice of around 2.5 million customers who left Vodafone
during the last three years.
0%
20%
40%
60%
Telstra Optus Others
Market Share
subscribers
Revenue

3. Fig (3) Revenue market share. Company data credit Suisse estimates [7]
Nevertheless; when we look at the yearly growth figures, we can notice a correlation between Optus and the
total market results, and Telstra not only it has positive growth but in the last year and a half the growth is
slowing down. Moreover, for the same time period, Optus has decreased its negative growth to almost
equalize the previous result.
Fig (4) Mobile service revenue growth. Company data credit Suisse estimates [7]
Both Telstra and Optus are regional telecom operators, extracting information regarding specific financial
figures such as CAPEX, OPEX, and ARPU about their mobile units in Australia is difficult and tricky.
However, the EBIDTA margin figures for 2014 could be found. The EBIDTA margin gives an indication
about the operating cost effect on profitability, a higher EBIDTA margin indicates a lower impact of
operating costs on net profit.
Comparing Telstra and Optus EIBIDTA, we have Telstra with 40%, while Optus has 29% [15,16].
Strategy:
Both Telstra and Optus summarize their business strategy in three points:
- Improving customer advocacy by improving customer interaction, product differentiation, and
process focus.
- Driving value from the core: believing in their network superiority, and in order to attract more
subscribers, they are investing more and more money in upgrading their network.
- Building new growth businesses:exploring the need of other business models such as IPTV,
Healthcare and educational services, expanding operations in Asia, and network applications and
services.
0%
10%
20%
30%
40%
50%
60%
Telstra
Optus
1H12 2H12 1H13 2H13 1H14 2H14
-10%
-5%
0%
5%
10%
15%
Telstra
Optus
Market
1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14

4. We can have a look at how some of these elements are addressed in reality by making the following
comparison
Challenges:
A challenge for Telstra is to maintain its reputation of having the best network performance and coverage in
the upcoming years, while Optus is determined to deploy as competitive as possible network, the challenge
will be to sell this achievement to new customers.
Having the superior network performance and the largest coverage area are big matters to Telstra. In
February 2014 Telstra won a court battle against Optus. Supreme Court found Optus advertising about their
coverage area was “likely to mislead or deceive”, forcing Optus to remove advertisements and online
declarations about coverage area [17].
References:
[1]http://www.smartcompany.com.au/technology/trends/35929-telstra-nudges-40-mobile-market-share-after-picking-up-400-000-extra-customers-
vodafone-starts-comeback.html
[2] http://www.whistleout.com.au/MobilePhones/News/aldi-amaysim-big-winners
[3] http: //www.abs.gov.au/ausstats/abs@. NSF/Web+Pages/Population+Clock? opendocument
[4] http://www.telstra.com.au/aboutus/our-company/future/index.htm
[5]http://www.budde.com.au/Research/Australia-Mobile-Communications-Statistics-and- Forecasts.html
[6] http://www.kimbercapital.com.au/blog/telstra-4th-dimension/
[7]Company data credit Suisse estimates http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=CD497FEA-A6BD-25EE-
087835F17F3B652A
[8] https://media.optus.com.au/media-releases/2014/optus-flicks-switch-on-more-4g-boosts-regional-coverage/
[9] https://media.optus.com.au/media-releases/2014/optus-4g-tops-out-across-top-end/
[10] http://whatphone.com.au/guide/optus-or-telstra/
[11] http://www.idd.com.au/mobile-providers.php
[12] http://www.theaustralian.com.au/technology/optus-seeks-answer-on-800m-nbn-deal/story-fn4iyzsr-1226760182491
[13] http://www.theage.com.au/news/business/optus-buys-virgin-mobile-for-100m/2006/01/11/1136956240754.html
[14] http://www.news.com.au/finance/business/how-did-vodafone-become-vodafail/story-fnda1bsz-1226496461128
[15] Optus annual report 2014. https://media.optus.com.au/wp-content/uploads/2014/07/SingTel-Optus-Annual-Report-2014.pdf
[16] Telstra annual report 2014. http://telstra2014ar.interactiveinvestorreports.com/
[17] http://www.theaustralian.com.au/business/telstra-wins-court-action-against-optus-over-misleading-advertising/story-e6frg8zx-
1226830771529
 investing $1.2 billion in spectrum
 99.5% population coverage, 85% by 4G
 reliable network coverage, expensive
 brand refresh 2011 (different brand colour for each service)
 new smart phones availability/new phone each year for the
24 months contracrs
 heavy sport sponsorship
 Limited plans
 investing $649 million in spectrum
 98.5% population coverage, 75% by 4G
 balance price with coverage
 brand refresh 2013 (adding: yes)
 device insurance for mobiles and tablets. [$13 monthly
plus ($ 50 damage)/($ stolen/lost 150) ]
 Out of “old-fashioned” sport sponsorship
 easy to understand and many plans
 works with around 2/3 of the MVNOs
 aims to break Telstra’s mobile dominance by 2016