3 Q11 Australia Mobile Operator Forecast Executive Summary

3Q.2011 Australia Mobile Operator
Forecast
Australia to have 36.9 million mobile subscriber connections in 2015 with Optus
taking 30% market share

October 2011

Stable subscriber growth continues in Australia
11.2% industry average subscriber growth in 2Q.2011

INDUSTRY AVERAGE Chart 1: Subscriber Growth (4Q08 – 2Q11), %
SUBSCRIBER GROWTH IN
AUSTRALIA’S WIRELESS MARKET 80%
IS INCREASING
70%
The operator-wide average
subscriber growth (YoY) was 11.2% 60%
in 2Q.2011, up from 9.1% in
50%
2Q.2010.
The largest operator, Telstra, saw 40%
its subscriber growth (YoY) rise from
30%
3.6% in 2Q.2010 to 15.7% in
2Q.2011.
20%
On the other hand, SingTel Optus’s
subscriber growth was 4.7% in 10%

2Q.2011, down from 8.6% in
0%
2Q.2010. 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11
Subscriber growth at Vodafone
Telstra SingTel Optus
Hutchison Australia (VHA) was 5.5%
Vodafone (VHA) Hutchison
in 2Q.2011.
Virgin Mobile Australia Pty Ltd Industry Total

Source: IEMR

© 2011 IE Market Research Corp.
All rights reserved.

2

ARPU growth in Australia is now positive
+0.1% industry average ARPU growth in 2Q.2011

THE INDUSTRY AVERAGE ARPU IN Chart 2: ARPU Growth (4Q08 – 2Q11), %
AUSTRALIA IS STABILIZING
25%
The industry average monthly ARPU
was US$ 52.26 in 2Q.2011, up +0.1% 20%
YoY.
15%
At the operator level, Vodafone
Hutchison Australia’s monthly ARPU 10%
increased by 8.1% (YoY) to reach US$
5%
56.07 in 2Q.2011.
0%
On the other hand, ARPU growth
(YoY) at Telstra declined from 2.5% in -5%
2Q.2010 to -2.6% in 2Q.2011.
-10%
ARPU at VHA is now higher than
ARPU at Telstra and SingTel Optus. -15%
4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

Telstra SingTel Optus Vodafone (VHA) Hutchison Industry Total

Source: IEMR


3

Minutes of Use per Subscriber is decreasing
Industry average MOU/Sub is about 217 minutes per month

The operator-wide average Minute of Chart 3: MOU/Sub Growth (4Q08 – 2Q11), %
Use (MOU) per subscriber was 217
25%
minutes per month in 2Q.2011, down
-5.9% YoY. 20%

MOU/Sub at SingTel Optus
15%
continues to be higher than MOU/Sub
at Telstra and VHA. 10%

MOU per subscriber at VHA, Telstra 5%
and SingTel Optus were 232 minutes,
184 minutes, and 282 minutes 0%
respectively in 2Q.2011.
-5%

-10%

-15%
4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11


Source: IEMR


4

Positive EBITDA growth at all of Telstra, SingTel Optus and VHA
in 2Q.2011

+4.1% INDUSTRY-AVERAGE EBITDA Chart 4: EBITDA Growth (4Q08 – 2Q11), %
GROWTH IN 2Q.2011
100%
• The industry average EBITDA growth
rate (YoY) in 2Q.2011 was 4.1%, down 80%
from 5.4% in 2Q.2010.
60%
• All of the major three operators
40%
enjoyed positive EBITDA growth (YoY)
in 2Q.2011. 20%

• EBITDA growth rate (YoY) at Telstra 0%
was 5.9% in 2Q.2011 (up from -0.9% in
2Q.2010). -20%

• VHA’s EBITDA growth (YoY) was -40%

5.0% in 2Q.2011 (down from 17.4% in -60%
2Q.2010). 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11


Source: IEMR


5

So what is IEMR’s Forecast?
Total mobile subscriber connections in Australia to reach 36.9 million in 2015

We forecast that the number of total Chart 5: Subscribers by operator (CY09 – CY15F)
wireless subscriber connections in
Australia will increase from 28.3 12,000
million in the end of 2010 to 36.8
million in the end of 2015. 10,000
Given the latest quarter numbers,
our model predicts that Telstra will 8,000

subscribers (000s)
have approximately 14.6 million
mobile subscribers in 2015.
6,000
In our view, Telstra will continue to
hold a dominant position in Australia
with a 39.7% market share in 2015. 4,000

We forecast that SingTel Optus will
2,000
have 11.2 million wireless subscribers
in 2015 (30.3% market share).
0
We expect that the number of
CY09 CY10F CY11F CY12F CY13F CY14F CY15F
subscriber connections at Vodafone
Hutchison Australia will continue to
increase and reach 9.4 million in 2015 Telstra SingTel Optus Vodafone Hutchison Australia
(25.6% market share).

Source: IEMR


6

ARPU levels in Australia to remain stable

WE EXPECT THE OPERATOR-WIDE Chart 6: Average Revenue per User (ARPU)
AVERAGE ARPU LEVEL TO per month (CY09 – CY13F), AUD
REMAIN AT APPROXIMATELY AUD
49 OVER THE NEXT TWO YEARS 60

Our forecasting model does not
predict a major change in the industry 50
average ARPU for the next two years.
The industry average ARPU will be 40

ARPU (AUD)
AUD 49 per month in 2013.
We expect that VHA’s ARPU level 30

will continue to be higher than those of
SingTel Optus and Telstra over the 20
next two years.
10

0
CY09 CY10F CY11F CY12F CY13F

Telstra SingTel Optus Vodafone Hutchison Australia Average

Source: IEMR


7

Telstra to enjoy the highest profitability

Telstra will be enjoying the highest Chart 7: EBITDA margins (CY09 – CY13F), %
level of profitability in Australia’s
wireless market during the forecast 50%
period.
Our model is predicting that Telstra’s 40%
EBITDA margins (calculated as
EBITDA/service revenue) will be about
34% in 2013. 30%

On the other hand, we forecast that
SingTel Optus' EBITDA margin will be
20%
about 27% over the next two years.
VHA’s EBITDA margin will remain
lower than those of its competitors at 10%
about 18% from 2012 to 2013.

0%
CY09 CY10F CY11F CY12F CY13F

Telstra SingTel Optus Vodafone Hutchison Australia Average

Source: IEMR


8

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9

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10

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3 Q11 Australia Mobile Operator Forecast Executive Summary

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