Singtel – CIMB

Optus new price plans target high value mobile data users

Optus has updated its mobile data plans including shared data across up to five devices. It has increased low-end sim-only plans by A$5 but lowered the key A$65 plan to A$60 and extended data allowance from 2.0GB to 5.0GB. We think its intention is to win more share in this key data usage bracket. We think these developments help set the company up through FY15 for FY16.

What Happened

Optus has updated its My Plan Plus mobile plans with significant increases in data allowances, higher included voice minutes and adjustments to pricing. However, at A$30 per month (sim only) for 0.5GB, Optus’s entry level price is A$15 below Telstra’s entry level price; each across up to five devices. In the key A$60 bracket it offers much more value than comparable Telstra packages. Optus offers data usage across up to five devices on the same data plan (‘bucket plans’); Telstra has a similar offer but with a A$10 monthly charge per device. VHA has no shared data plans at this point.

What We Think

We think the changes represent a significant statement of intent by Optus to increase mobile subscriber share in the higher value segment. Its expansion of network capacity offers it the opportunity to include greater allowances to win back customers and it has priced to this advantage. Notably, in the key 5.0GB shared service plan, Optus has substantially undercut Telstra both in device charges and the amount of data offered.

What You Should Do

We see competitive pressure in the Australian mobile market increasing through FY15, slowing industry mobile service revenue (MSR) growth. We think MSR is likely to pick up from FY16 with growing use of devices, M2M and data usage. Although we think Optus will do well to hold the network differential between it and Telstra at current levels through FY15, we expect it will be in a stronger position to win back share at the premium end of the mobile subscriber market by FY16. We continue to like SingTel as an investment and retain our Add rating and SOP-based S$4.10 target price. Key risks are mobile competition in Australia from Telstra and VHA and Optus’ execution of its network rollout.

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