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Telstra Mobile Revenues Set To Fall As Consumers Dump Contracts

Mass Retailers are reaping the decision by over 12 million Australians to dump their mobile contracts, a move that is set to hurt Telstra revenues.

A study of Australia’s mobile services market by technology research firm Telsyte estimated that of over 25 million handheld mobile services in operation, 12 million are not on contract.

Exposed are carriers such as Telstra, Optus and Vodafone as their customers move to shopping around for rival services.

Instead more than 12 million smartphone users are opting for no contact at a move that has seen consumers flock to mass retailers over carriers for their next model smartphone.

Telsyte managing director Foad Fadaghi said the gap between what mobile providers are offering in terms of calls and data has narrowed in recent years and most plans now include enough for heavy consumption.

“The way people can use their smartphones is different from even a few years ago,” Mr Fadaghi said, pointing to media consumption and the use of subscription video on-demand services such as Netflix, Stan and Presto.

The report estimates that 52 per cent of mobiles in Australia are on 4G networks and that will increase to 85 per cent by 2020.

“We’ve come to a point where the interplay of those services is impacting people’s choice of network.”

The AFR said that Optus securing the rights to the English Premier League football for $189 million over three years is a prime example of content playing a role in which provider customers choose. Optus is only making its EPL service available to its customers.

“The market is ripe for a lot of disruption and change. There’s going to be different winners and losers. The warning signs are there that Telstra’s revenue cash cow is going to be under some pressure,” Mr Fadaghi said.

Telsyte estimates that 71 per cent of Telstra’s new additions in the six months to December 2015 have been machine-to-machine (M2M) devices, which typically have lower average revenue per user when compared to handsets.

Mr Fadaghi said competition would bring prices down, putting greater pressure on margins. He said the impact of the NBN, different bundling opportunities and the entry of new players into the market would all increase pressure on telcos.

“There’s going to be a lot of people that will see a mobile phone service relationship as an important way of locking in other services … other telecommunications services, handsets, media propositions, or getting you to go to the same supermarket,” he said, highlighting Woolworths and Kogan’s mobile offers.

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