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Carriers Banging Up Phone Plan Prices To Please Investors

The cost of mobile phone plans in Australia are rising and Telstra is the driver at a time when consumers are desperately trying to manage price rises and inflation issues.

When Australia’s biggest mobile phone carrier Telstra decided recently to remove the clause in its postpaid mobile contracts linked to CPI and inflation their competition also saw the opportunity to follow Telstra’s lead with both Optus and Vodafone now tipped to jack up mobile plan prices again despite both carriers only recently lifting prices.

Optus has already moved their pricing, with what the Australian describing them “solid price hikes” according to a quote from UBS analyst Lucy Huang.

“We note Singtel management has announced ambitions to improve return on invested capital at Optus which are currently below 2 per cent, and we see mobile pricing as one of the key drivers.” she said.

UBS like the idea of price rises as it benefits investors over consumers who are struggling.

What the carriers are looking for is a quick return on invested capital that they have outlaid for 5G networks in Australia and of late rural Australia.

“We note both key competitors have now put through above CPI price increases – Vodafone up 9% back in late March, and now, Optus up 5-6%,” Ms Huang says.

“We remain watchful on Telstra’s next price change, with our base case assuming 3 per cent postpaid average revenue per user growth in FY25, driving growth in the dividend from 18c in FY24 to 19c in FY25.

Macquarie Equities concedes that the above-inflation price increase is “positive for the group and industry more broadly” but sees it as more of an “incremental positive” as it says Optus is “playing catch-up on mobile pricing.”

Telstra shares have risen on the news of possible price rises and after they announced the sacking of over 2,800 staff.

“We think the equity markets will take a ‘watch-and-see’ approach after today’s pricing change from Optus,” says Macquarie’s Darren Leung.

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