Telstra too dominant says Optus

Rivals believe the telco giant’s dominance will continue until 2019.

a woman

Despite the Australian mobile market reaching the saturation point and many new internet service providers coming online, Telstra’s (ASX: TLS) number one rival believes that without intervention, the company’s dominance will continue until 2019.

According to The Australian Financial Review competitors are becoming concerned with Telstra’s lucrative deal with the government and its continual dominance in both mobile and fixed internet services. Singapore Telecommunications’ (ASX: SGT) Optus is growing increasingly worried that Telstra’s infrastructure and services, namely its Domestic Transmissions Capacity Service (DTCS), will enable the Telco to continue to flex its muscles and charge fees that are not competitive. The DTCS carries all phone and internet data over long distances and between cities.

According to Optus, Telstra’s control and dominance in the mobile service market has enabled it grow its number of customers massively despite the market reaching saturation point. “Total mobile market growth has stalled as the market has reached saturation [but] Telstra has increased its market share in all the relevant metrics since 2009”.

Optus says, “Telstra has acquired around 70 per cent of all [new mobile customers] since June 2010,” and the additional revenue, together with NBN payments, will enable it to retain its position in the mobile market until 2019.

Hutchison Australia’s (ASX: HTA) Vodafone says the current regulation is “ineffectual” and “now is the time for the ACCC to overcome these problems”.

Telstra has rebutted the call for more regulation by saying the introduction of the NBN Co’s services will make the market even more competitive than it currently is. “Prices have declined and there is a strong case for rolling back DTCS regulation further. NBN Co itself is also introducing new competitive alternatives to traditional transmission tail services,” Telstra said.

Telstra dominants mobile and fixed internet services for both retail and business use. Currently the number of mobile customers for Telstra, Optus and Vodafone are approximately 15.1 million, 9.5 million and 6 million respectively. However recent competition from the likes of iiNET (ASX: IIN), TPG Telecom (ASX: TPM) and Optus have begun winning some of the fixed internet market share.

The next graph shows the results of a Roy Morgan Research Business Survey across a number of key industries.


Foolish takeaway

Telstra is likely to be constantly challenged over its regulation between now and the rollout of the National Broadband Network, and as the chart shows, competitors can still win substantial market share under the current regulations. For example, iiNet has been growing rapidly in the professional services industry whilst TPG is accelerating in the retail industry.

With its legendary, fully franked 28 cent dividend, Telstra is the darling of Aussie investors. But with its share price skyrocketing over the past year, is Telstra past its prime? Click here for our brand-new report: “Is It Time to Sell Telstra?”

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Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies. 

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