Will Telstra’s lead in mobile persist?
Last month we took a quick look at the Commsday test of mobile operators in Australia (see here for the article). Notably, Telstra’s (ASX: TLS) service scored best followed by Optus (ASX: SGT) and then Vodafone. We also inferred that this may possibly explain Telstra’s growing market share in the mobile space over the past several years.
Now we pose the question, could this change?
We know that both Optus and Vodafone understand that in order to compete with Telstra, they must ‘bridge the capability gap’, i.e. the service they provide must be on par or better than Telstra in terms of network reliability, reach and speed.
Reach is difficult, because there’s only a small population of people in the most remote areas of Australia and hence it doesn’t pay for providers to compete aggressively for these customers. Reliability and speed are however critical because a large number of subscribers can be won in metro areas where the profits to capital expenditure ratio is much better.
As such, Vodafone and Optus have been investing billions of dollars in improving their network performance and customer service – and it seems to be paying off. Optus notes that in the second quarter it picked up 60,000 subscribers. We’ll have to wait for Vodafone but ‘market talk’ suggests that customers may not be running away as quickly as they were in previous years.
In many metro areas, the Optus network and the Vodafone network can match Telstra’s in terms of speed and reliability. The question to now ask is, ‘if performance becomes homogenous amongst the providers, will customers move to the cheaper and more ‘data-packed’ plans that Optus and Vodafone offer?’ We can’t answer this now – but keep posted for their first half results.
Scott Shuttleworth is an Analyst with Montgomery Investment Management. To invest with Montgomery, find out more.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
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