4G rivals Vodafone, Optus put heat on Telstra’s bottom line

elstra may have the fastest 4G mobile network in the nation but tighter competition from rivals and ongoing network outages look set to take their toll on the incumbent’s bottom line.
A report from OpenSignal, which specialises in wireless coverage mapping, has pinpointed Telstra’s 4G network as the fastest in the country, with a download speed average of 23.6 Mbps. However, Vodafone and Optus are nipping on Telstra’s heels.
Optus’s network clocked in at 19.1 Mbps while Vodafone delivers 18.4 Mbps. Telstra’s rivals are also catching up when it comes to delivering a consistent signal. Vodafone and Telstra are now neck and neck, with customers of both telcos able to connect 76 per cent of the time, while Optus customers can connect 73 per cent of the time.
The report also looked at latency, which measures the response time of a network. Networks with lower latency send data back and forth much more quickly and, according to the OpenSignal report, Vodafone and Optus are ahead of Telstra on that front. Latency is an important measure of overall network quality as the telcos start moving voice calls onto their 4G networks.
“The 4G latency award was split between Optus and Vodafone, with both coming in under 55ms (milliseconds),” the report said. Telstra’s 4G network had a latency of 56.2ms.
While the OpenSignal report is encouraging for Vodafone and Optus, Telstra’s network still commands a premium for its speed and overall reach. However, a spate of outages has put the brand under pressure and looks likely to cost Telstra market share. According to Deutsche analysts Craig Wong-Pan and Peter Milliken, mobile customer churn rates at Telstra could push up from 11 per cent to 19 per cent, posing a serious headache for the telco.
A survey of 500 Telstra customers backed by Deutsche has highlighted that many are keen to switch. According to the analysts, the sentiment could lead to a 6 per cent drop in Telstra’s mobile subscriber base in the 2017 financial year, forcing it to cut its earnings-per-share estimates by 3.5 per cent.
Telstra’s landline and broadband businesses are not immune to churn either, with a loss of customers in the fixed data market potentially dragging the telco’s earnings per share down a further down 1.6 per cent.
“We have adjusted our forecasts to reflect mobile churn increasing to 19 per cent and fixed data churn increasing to 21 per cent in FY17,” the Deutsche report said.
Meanwhile, Vodafone and Optus aren’t just beefing up their networks but also attacking Telstra on price, with Morgan Stanley analysts pointing out that Vodafone has stepped up the competition in the prepaid market while Optus is ramping up data allowances.
“We forecast Telstra to lose market share in mobile from 52 per cent to 50 per cent by FY17 despite increasing its investment in mobile,” the analysts said.