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Optus loses customers and revenues

Optus has continued the trend of losing customers, with 38,000 deserting the mobile carrier in the three months to September 2013.

That follows 59,000 leaving in the three months to June, although Optus still retains close to 9.5 million post-paid and prepaid customers.

As a result, Optus – owned by Singapore Telecommunications (ASX: SGT) saw its total revenues drop 15% to S$2.5 billion for the September 2013 quarter compared to the same period last year, although that was partly due to the Australian dollar depreciating 10% against the Singapore dollar.

Free cash flow dropped S$129 million from S$419 million to S$290 million for the first half of 2014, some of it due to new mobile plans with a series of caps to limit bill shock for customers. Mobile phone and equipment revenues fell $27 million as device subsidies were wound back.

Unlike Telstra Corporation (ASX: TLS), which has been growing the number of customers, both Optus and Vodafone – jointly owned by Hutchison Telecommunications (ASX: HTA) and Vodafone Group, have been losing customers. Optus hasn’t seen the slide quite like Vodafone, which can’t seem to plug the leaks, losing an estimated 580,000 customers in the three months to September. Telstra has around 15 million customers, while Vodafone lags its larger competitors with 5 million.

Despite the fall in revenues, Optus saw a 15% rise in earnings before interest, tax, depreciation and amortisation (EBITDA) to $587 million for the September quarter, as it cuts costs and outsources staff.

Both Optus and Vodafone are ramping up their 4G networks, in an attempt to stay in touch with Telstra. Vodafone is reported to have the current fastest 4G network in Australia’s five largest capital cities, with Telstra leading in Adelaide and Perth.

Foolish takeaway

It’s a tough ask taking on market leader Telstra in the mobile phone sector, and Telstra is making it harder for its competitors for improving its customer service, mobile coverage and developing even faster networks. Optus and Vodafone have their work cut out for them in the years ahead.

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Motley Fool writer/analyst Mike King owns shares in Telstra. You can follow Mike on Twitter @TMFKinga

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