Wireless war set to hurt margins

Australia's 3 network claims gains after price attack

A price war in Australia's booming wireless broadband sector is threatening to eat into margins for telecommunications companies and slow revenue growth in the area for market leader Telstra.

Hutchison Telecom Australia's 3 network is confident it has eaten into some of Telstra's early market-share gains in wireless broadband after a strong rise in customer subscriptions from an aggressive discounting campaign that ended last week.

HTA's general manager of product and service, Mira Bashi, says the carrier's decision to slash the cost of its 1GB offering by half had sparked a good response from customers, especially in the weeks after Christmas when laptops dominated personal purchases.

"The response has been very strong and it's helped that quite a few customers had laptops under the tree this year," Bashi says.

Mobile broadband products include data cards or USB modems that plug into the side of a laptop to link it to the internet without the use of any cables.

The wireless technology uses mobile infrastructure and is seen as the fastest-growing segment within broadband services and the one that can offer some of the best average revenue per user.

HTA cut the price of its 1GB plan by half to A$14.50 (NZ$16.50) on 7 December in a move that compelled rivals such as Vodafone and Optus to introduce their own discounted plans. This in turn forced market leader Telstra to cut the price on its products on 13 December.

Macquarie Research analyst Andrew Levy says new subscriptions to Telstra's mobile broadband products were strong in the half to 30 December, but he expects that aggressive discounting by rivals would slow this in 2008.

Levy says Telstra's revised pricing, which brought down the cost of some plans to consumers by up to 38%, would affect growth of its revenue base in the six months ending 30 June.

HTA says it had 82,000 mobile broadband and X-Series internet phone customers at 30 June 30, 2007. But industry sources suggested the aggressive discounting campaign by the carrier, which included a USB modem giveaway, could result in a double-digit boost to customer growth numbers.

Bashi says the plan had attracted some distinct segments such as university students and the younger demographic of 18 to 35-year-olds who lived in shared accommodation.

But one industry analyst says that while HTA's discounted plans might have lifted its market share, its margins would be slim compared with carriers such as Telstra or Optus, which typically attracted more business customers.

— Australian Financial Review

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Tags AustraliaNetworking & Telecomms ID3 networkwireless war

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