Telstra Corporation Ltd (ASX: TLS) has seen its mobile division continue to go from strength to strength – adding another 560,000 retail customer services to its network in the past 12 months – while rivals are struggling to grow at all.
Vodafone appears to have turned the corner after a number of years of losing customers, adding 126,000 customers in the past 12 months – although just 7,000 came in the six months to June 2016. Vodafone had a total of 4,986,000 customers (post-paid and pre-paid) at the end of June 2016.
Optus, on the other hand, reports that it had 9,337,000 customers/services, which is down 42,000 from the 9,379,000 reported at the end of June 2015. I should note that each of the telcos provides their data in different formats, with Optus for example including mobile broadband customers. And that sector has been a disaster for the company owned by Singapore Telecommunications (Singtel), with 77,000 less customers at the end of June 2016 that it had at the end of June 2015.
Telstra too includes mobile broadband and has 17.2 million customers at the end of June 2016 compared to 16.7 million at the end of June 2015. But even adding more than half a million new services could stop the telco's mobile revenues falling 2% compared to the previous year.
The problem all three telcos face is that competition is driving average revenue per user (ARPU) down and their revenues are shrinking – even if they increase customers/services connected as illustrated by Telstra's results.
However, one thing appears certain. Telstra's market share is growing (based on mobile revenues), and this time it's Optus that is losing market share. Based on mobile revenues, Telstra has 54% of the market, with Optus losing 2% to fall to 28% and Vodafone steady with 18%.
It also makes me wonder why Singtel doesn't offload Optus while it's still very valuable and they can get a top price for it. Optus made S$9.3 billion in revenues and S$2.8 billion in earnings before interest, tax, depreciation and amortisation (EBITDA) in the 2016 financial year. But that has declined from S$11.5 billion and S$3.1 billion in EBITDA just three years ago and appears to be trending even lower.
One buyer that I'm sure would be very interested would be TPG Telecom Ltd (ASX: TPM). Most market commentators expect broadband provider TPG to make a bid for Vodafone at some stage – but why not Optus?
Foolish takeaway
Telstra remains the dominant gorilla in the telecommunications space, particularly mobile networks, although the telco will need to spend more capital expenditure (and it is) to ensure the reliability of its network.
