There’s been a lot of doom and gloom this week about the future of Australia’s once-invincible national telco company Telstra, but experts say the titan’s woes are actually good news for consumers.
The New Daily spoke to a number of experts to get some insight into what Telstra’s troubles mean, and the verdict was clear: It’s a sign the market, which remained monopoly-like long after the government sold off Telstra, is now as competitive as it’s ever been.
In particular, competition on the mobile side of the market is fierce, and looks to remain so for the foreseeable future.
That means better deals for less money – particularly in the mobile sector. As for Telstra, its colossal profit margins leave it with plenty of room to move.
So if you don’t own a large portfolio of Telstra shares, there’s not much to worry about.
On Monday Telstra admitted that weaker-than-expected performance meant it wouldn’t be making as much money as it hoped.
That caused the share price to plummet from $3.20 a share at the beginning of the week to $2.86 on Thursday afternoon. That’s a fall of about 10 per cent – massive in the share market world.
What exactly was behind the fall? Partly it was to do with the arrival of the nationally-owned National Broadband Network, which has ended Telstra’s monopolistic stranglehold on the nation’s fixed line internet network.
However, Telstra revealed it had as much to do with the mobile side of the telco industry, which has suddenly become much more competitive.
This unexpected surge in competition has resulted in a drop in the amount of money Telstra makes per mobile user (down 3.6 per cent).
Nevertheless, Telstra boasted that over the three months to March Telstra picked up an additional 60,000 postpaid customer.
But Optus did much better. The Singapore government-owned company (that’s right) released its results on Thursday, revealing that in the three months to March it managed to pick up an extra 86,000 postpaid customers – 24,000 more than Telstra.
But like Telstra, it also saw the amount it makes per postpaid mobile customer fall, by 3 per cent.
In other words, competition appears to be forcing Telstra and Optus to charge customers less.
Why the increase in competition?
Angus Kidman, editor in chief of comparison website finder.com.au, attributed the increased competition in the mobile sector to an explosion of unlimited mobile data plans.
“For the last five years every single plan has offered unlimited calls and texts. It’s absolutely baseline. So data was the main point of difference,” he told The New Daily.
But he said this changed a few weeks ago, when the main three providers – Telstra, Optus and Vodafone – suddenly launched unlimited data plans. While he said this represented a major switch, he added a note of caution.
“We’ve got all these unlimited plans on the market, but if you look a bit closer, they’re not actually unlimited,” he said.
The issue, he said, was that the plans are generally offering high-speed data up to a certain limit – 40 gigabytes a month in Telstra’s case – after which it drops to a much lower speed.
“It wouldn’t be fast enough to stream videos. But the main reason people want unlimited mobile data is to watch videos,” he said.
He also pointed out that most of the unlimited plans locked in consumers for 12 months. And given the market is intensely competitive, the chances are the deals would get a lot better over those 12 months.
Overall, though, he said the concept of unlimited data plans was probably here to stay.
The future looks good for consumers
Brian Lo, a telco analyst with financial research house IBISWorld, said price competition would “remain intense”, and that the launch of 5G – which will hugely improve mobile speeds – will not increase prices.
“Once 5G networks go online next year, the three majors [Telstra, Optus and Vodafone] are unlikely to charge higher prices for 5G plans. Their existing subscriber base will simply be shifted to the 5G network.
“This gives them a chance to differentiate their services from cheaper competitors as resellers are unlikely to be given access to the 5G network – the same way as they were kept from accessing 4G networks for 3-4 years.”
In the long-term, though, he said the big three’s dominance of 5G would dampen competition.
But he said the arrival of TPG in the mobile sector would likely introduce extra competition. TPG has already signalled it will give new customers six months unlimited mobile data for free, and then $9.99 after that.