Mobile Phone Lanyard Mobile phone revenue to grow

REVENUE growth in Australia's mobile phone sector has continued its strong upward trend, gaining 9.9 per cent in 2007, a result that analysts have partly attributed to the continued overall strength of the economy.

The steady increase in mobile revenue, which comes alongside continued broadband penetration, was driven by the addition of 1.4 million mobile subscribers last year, a 38 per cent increase on the 2006 growth level, JPMorgan analyst Laurent Horrut said in a research note.

Australia's mobile market, which is rapidly approaching full penetration, generated $11.25 billion in revenue in 2007 for the big four players: Telstra, Optus, Vodafone and Hutchison.

Revenue for the sale of mobile equipment grew by 19.1 per cent to $1.27 billion, while revenue from services, including wireless broadband, grew 9.3 per cent to $9.98 billion. Mr Horrut said the level of revenue growth compared favourably with the Eurozone and reflected "the continued strength of the Australian economy overall".

Despite the overall robust mobile performance, Optus was the biggest loser, Mr Horrut said.

"While in the past Optus was able to limit its margin decline, we note in this period Optus margins also contracted by four percentage points to 32 per cent," he said.

Optus had "haemorrhaged service revenue market share, losing 3 per cent in the past two years.

"We believe this reflects Optus's particularly high exposure to capped plans and mobile termination revenues, with termination rate cuts from 21c to 12c within three years," he said.

The main beneficiary of Optus's losses in service revenue was Hutchison, which picked up a 2.3 per cent gain in share over the past two years. As the mobile market continued to grow apace, broadband use also continued to expand, with broadband penetration reaching 64 per cent of Australian households, up from 49 per cent the year before.

Mr Horrut said the uptake showed no sign of slowing down and placed Australia in line with the OECD average.

"However, we note that the definition of broadband in Australia - download speeds of over 256kbps - might not be as 'broad', that is, as fast, as in other OECD countries," Mr Horrut said.

DSL technology, which turns copper wires into broadband, continued to be the dominant broadband technology in Australia and was used for 73 per cent of connections in the mass market.

Cable accounted for 14 per cent of total broadband services, while wireless broadband represented "a meaningful" 13 per cent of total connections, boosted by strong take-up of Telstra and Hutchison data cards.

"Whilst representing a material number of connections, we believe wireless broadband will remain a niche market in Australia and expect growth to slow down considerably in 2008-2009," Mr Horrut said.

Telstra re-confirmed its dominance of Australian broadband by snaring 47.9 per cent of the market, but its gain in market share was at a slower pace last year than in 2006.

Mr Horrut said Telstra market share gain was driven by its dominance in wireless broadband, where the former government-owned telco had cornered an estimated 65 per cent of the market, coupled with residual broadband growth from regional areas where Telstra dominated because of a lack of competition.

Other DSL ISP's accounted for 24 per cent of market share, while Optus had 17 per cent, iiNet had 4.1 per cent and AAPT had 3.4 per cent.