Singtel’s Optus gears up to go toe-to-toe with market leader Telstra

This will cause higher capital expenditure.

Singtel’s Optus intends to wrest subscriber base from Australian market leader Telstra, according to a report by Maybank Kim Eng.

Optus intends to roll out a better network, innovation, improved distribution and mobile plans that meet customers’ needs.

“As such, higher capex of AUD1.7b this year could be sustained over the next few years, potentially capping Singtel’s ability to raise payouts. However, the higher capex should pay off if Optus succeeds. This could cap Singtel’s ability to dish out more dividends but should pay off if Optus succeeds,” said Maybank Kim Eng.

Here’s more from Maybank:

The bulk of the AUD1.7b will be spent on improving Optus’s mobile network quality to match Telstra’s. Optus will also enhance its fixed network as NBN covers only 20% of the Australian population. With good fixed coverage to complement mobile coverage, it should be able to offer integrated services.

Whereas Telstra has always stood for reliability and Vodafone for affordability, Optus lacks a clear identity in the Australian marketplace. Mr Lew now wants the Optus brand to stand out for innovation and good customer care. Optus has started with data-sharing plans that its competitors are now copying.

With Singtel’s help, its next step could be to combine mobile broadband offerings with content from well-known providers such as Netflix. This essentially associates connectivity with entertainment. Mr Lew believes this combination will resonate with Australian consumers.