Andy Penn Spins Environment To Hide Shocking Mobile Sales Slump & Price Rises
COMMENT: Telstra boss Andy Penn has spent the past few weeks banging on about environmental, social and his governance goals instead of explaining how he intends to address the issue of falling revenues and a lack of interest in 5G.
Recently his spin doctors announced that one option to generate revenue was to jack up prices for his shrinking mobile customers, the excuse for the price rise is that Telstra have to pay for a 5G network.
In the first half of the 2020 financial year, Telstra’s revenue from post-paid mobile contracts fell 3.6 per cent, while prepaid fell by 13.4 per cent. That was despite an increase in the mobile customer base of 159,000.
Penn’s next big problem is that he is going to have to compete with new kid on the block a merged TPG and Vodafone who have both 4G and 5G spectrum in the rich and in demand Melbourne and Sydney markets.
The merger gives TPG around 60 per cent more spectrum than Vodafone had on its own, across the 4G and 5G spectrums, opening up huge capacity and giving the company real capability to strip share away from Telstra.
The price rises which range between $5 and $15 a month, were explained away as being because of the company’s extra investment in 5G networks.
Telstra’s new plans mean a customer will have to spend a minimum of $65 a month to access 5G services, up from $50.
The telco said customers would get more data under the revamped offerings, but Telsyte analyst Foad Fadaghi questioned whether consumers really needed more mobile data, given so many people were staying at home during the pandemic.
Tens of thousands of Telstra customers are using their home broadband and What’s App to make calls they are also cutting back their plans according to analysts.
Phillip Britt, Managing Director of Aussie Broadband a small Australian telco says his company is just one of many taking market share mostly from incumbents like Telstra.
Penn has become the master of spin, instead of talking about growth and revenues he talks about the environment, this allows media Companies that he is paying millions to in advertising and sponsorship to spin his messaging.
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The reason for the discrepancy is the all-important average revenue per user (ARPU) figure, which for its post-paid plans fell from $55.62 per month to $51.52 per month over the year. Telstra, in other words, made a lot less out of its mobile customers than it used to.
It was the same story for Optus, which reported its full-year results in May. Its mobile revenue fell 6 per cent in the financial year, and its ARPU for post-paid fell by 11 per cent from $42 per month to $37.
Telsyte analyst Foad Fadaghi said of the recent price rises “With economic headwinds, some consumers will be looking to consolidate their spend if their data caps are starting to far exceed their regular or irregular usage,” he said. “Telsyte research shows although data usage is growing, data allowances are growing much faster.
The average data utilisation rate in a given month … was 30 per cent in 2019, down from 41 per cent in 2018 and 50 per cent in 2017.”
The reason for the excessive price rise during the COVID-19 pandemic is because Telstra cannot afford to keep on driving prices down in their mobile businesses.
Fixed line is a disaster and they are making less money selling the NBN so mobile is the battleground and that means a high capital investment in new 5G towers.
They are also facing new competition in the future from satellite providers that will deliver high speed mobile for half the price Telstra charge.
One big looming problem is that if the new TPG decides to make a grab for market share by mass selling cheap mobile plans, it will mean more pain for Telstra shareholders.
On the other hand, it would be good news for consumers who could switch in the thousands away from Telstra to a new look TPG Vodafone.