On 27th February Vocus announced its 1H19 earnings. Revenue increased slightly but EBITDA and profits remain on a downward trend.
Consumer and business segments saw large declines in revenue and SIOs.
In a year of “resetting”, Vocus faces the difficult challenge of extracting value out of its fibre assets through enterprise projects and transforming its Consumer segment with a renewed focus on mobile and wireless.
Vocus’ Consumer and SMB businesses saw large revenue reductions of 12% and 27% respectively. These issues are compounded by significant margin impact from NBN wholesale prices.
We believe the decline in business revenue is a reflection of a wider decline in the business market given that Telstra and Optus also reported declines in their data related operations. Like Telstra, Vocus should focus on NBN in the business sector which may also help with its capacity and provisioning issues.
Vocus is hoping that fixed wireless and mobile services will combat its NBN issues – however it has not signed a wholesale agreement with Optus for fixed wireless and it is unclear to Venture how and when Optus will offer and price this new service to its wholesale customers.
Whilst Vocus’ Networks division increased 27% in revenue, this was predominately based on its successful subsea cable build.
Vocus states it is in the middle of a transformative phase and “reset year” as organisational restructure, leadership turnover and pricing pressures continue to impact its market competitiveness. Clearly, the transformation will not be an easy task in a competitive fixed market with low NBN margins and a strong MNO focus on 5G.