Optus Chases Telstra

Optus, no longer content with its clear second position within the Australian mobile telecommunications market, has reiterated its commitment to overtaking incumbent leader Telstra.

Optus currently had about 9.6 million mobile subscribers, while Telstra has around 16 million (Vodafone is a distant third with 5 million). Optus has committed to investing $1.2 billion dollars in the next financial year on both fixed line and mobile networks, in the process extending its LTE ‘4G’ coverage to about 90% of the Australian population by March 2015. That’s pretty soon, and thus pretty ambitious.

Optus hasn’t released investment figures for the following financial year, though one suspects they won’t be modest, given that they’ve targeted a 98.5% LTE coverage figure by 2016.

Bear in mind that Australia’s relatively low population density means that going from 90% to 98.5% is many times more costly than going from, say, 50% - 58.5%. That last 10% of the population has always been an issue for telco providers – or just about every infrastructure provider – since it exists well beyond metropolitan centres, and consequently provides no return on investment. It’ll be interesting to see precisely how much Optus is willing to spend. Certainly it’ll have to be a lot more than they spend at present.

Anyone driving between cities, or even regional centres, in Australia has probably noticed that coverage becomes a problem the further out you go. You eventually reach a point where Telstra’s network is the only one available. Then you reach a point where your phone doesn’t work at all (at least not as a phone – it still works as a clock). To put it another way, Telstra’s network services 99.3% of the population, but less than 50% of the actual landmass.

This provides a revenue and marketing advantage that Telstra certainly doesn’t care to relinquish. In the next financial year Telstra will spend over $1 billion just on maintenance, upgrades and extension to its mobile network. And you can bet they’ll respond aggressively to any move by Optus to encroach on their market share (mobiles account for over a third of Telstra’s annual revenue).

Still, let’s hope that Optus are as good as their word, since it’ll only be to the benefit of consumers.