The operator of the Optus telecommunications network Singapore Telecommunications Ltd (CHESS) (ASX: SGT) yesterday reported the results of its wholly owned Optus mobile network.
For the quarter ending March 31, 2015, Optus posted a profit of $236 million on operating revenue of $2.29 billion. The revenue and profit increased 11% and 7% respectively over the prior corresponding period.
For the full year Optus posted operating revenue up 4% to $8.79 billion and net profit up just 1% to $841 million.
Delisting
Optus is fully owned by giant Asian telecommunications business Singtel, which has decided to delist its Chess Depositary Instruments (CDIs) traded on the ASX in response to low volumes and liquidity.
Holders of the CDIs will be able to convert them into Singtel shares on a 1:1 basis, or exchange them for cash. The ASX-listed scrip is expected to finish trade from May 29, after which Singtel will be traded exclusively on the Singapore Stock Exchange.
Competitive environment
Optus is operating in a fiercely competitive space in the quest to win mobile market share from rivals Telstra Corporation Ltd (ASX: TLS) and Hutchison Telecommunications (Aus) Ltd (ASX: HTA), the co-owner of the Vodafone Australia network.
Optus says it now has a total of 9.43 million mobile subscribers in Australia, with 64,000 postpaid handset customers added in the quarter.
Like its rivals the company is attempting to leverage the demand for 4G services, with 345,000 new subscribers over the quarter, amongst a total of 3.53 million on the 4G network.
At the end of April 2015 Optus' 4G network reached 86% of the Australian population, although historically it has been behind Telstra in breadth of coverage. Optus also offers home broadband services with 1.02 million customers signed up to its home broadband services as at the quarter end.
Is it enough growth?
For the quarter it seems as though Optus has delivered some strong top line growth, although the flat full year profit is symptomatic of the competitive toll exerted on margins in the fight for market share.
Optus also has another problem on the horizon as rival telco TPG Telecom Ltd (ASX: TPM) is fighting for the number two position itself in the battle to challenge Telstra.
Overall, while the telco and internet services space is a growth one, it's hard to gain a competitive advantage, which means only the best businesses are likely to succeed and outperform.
If one man knows how competitive advantages and rock solid business models can produce years of outperformance over time it's Warren Buffett…
