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Telecom takes massive mobile hit

TOTAL MOBILE CONNECTIONS

Vodafone: 2.37 million (47.21%)
Telecom:  1.57 million (31.87%)
2degrees: 1 million (19.92%)
TelstraClear/MVNOs: 50,000 (1%)

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Telecom has taken another big hit in mobile customer numbers.

Acting CEO Chris Quin this morning said the company's total number of mobile customers had been "reset" at 1.6 million following the closure of its old CDMA network on July 31. All customers are now on XT.

In February, Telecom reported 1.987 million customers - around 639,000 of whom it said were on CDMA - but that only 300,000 of those were active.

But even allowing for the evaporation of those 300,000 inactives, Telecom has lost 187,000 mobile customers over the past six months. In February, it reported a loss of 180,000.

According to information released by Telecom today, only 63,000 of the 639,000 on CDMA switched to XT over the past six months - despite a range of carrots and sticks waved in their direction.

On a brighter note, it gained 36,000 contract customers in the half, and increased average revenue per user (see below). Prior to the CDMA closure, which took place a month after the end of the financial year, Telecom had lost 32,000 pre-pay customers. Mr Quin said this morning that the total revenue from CDMA was "only $600,000" in the network's last month, generated by 57,000 hold-out customers.

At the time XT was launched in May 2009, Telecom had 2.1 million mobile customers.

Earlier this week, Telecom announced an aggressive new $19/month plan, which seems to be squarely aimed at winning back those who have defected to 2degrees. At the other end of the customer spectrum, Mr Quin has been talking up a 4G trial for business customers.

2degrees recently said it had reached the 1 million customer milestone, with around 100,000 on contract plans.

Vodafone has more-or-less held the line, with only minor mobile customer losses.

More revenue from those remaining
The silver lining for Telecom is that the CDMA closure lowers its number of lower-yielding pre-pay customers, in term boosing its key ARPU (average revenue per user per month) metric.

The company said in a statement this morning:

Mobile ARPU increased by 9.4% to $29.14 in FY12 when compared to $26.64 in FY11.

It also reported a decline in voice revenue but a gain in data - although data price wars mean it slipped backward overall:

While mobile voice revenues declined by $18 million, or 4.3%, in FY12 compared to FY11, this was more than offset by $31 million, or 11.4%, growth in data revenues over the same period. The strong data revenue growth was driven by the increased number of higher value customers acquired and continued acceleration of data use and smartphone penetration.

Telecom's Skinny budget/youth focussed sub-brand gets online one-line of mention, noting it established itself as a pre-pay brand, and no financials or customer numbers [UPDATE: Mr Quin said the number of retail outlets carrying Skinny products would grow from 400 to 800 by the end of the year. The company will not break out any financials or customer numbers for the sub-brand].

The mobile numbers were part of Telecom's broader full-year result which saw it miss estimates in its first post-Chorus report.

At a briefing this morning, Mr Quin said the CDMA closure would save $5 million to $10 million a year, with spectrum also made available for XT.


All carriers count each connection as a "customer", so a person with separate SIM card accounts for, say, a mobile phone, data stick and iPad, counts as three customers. MVNOs or mobile virtual network operators resell service. TelstraClear; easily the largest MVNO, offers a rebadged version of Vodafone's service.

* Vodafone PLC quarterly financial report, May 23 2012
** Telecom full-year financial report, August 24, 2012
*** 2degrees CEO statement June 28, 2012
**** TelstraClear statement May 2012

More by Chris Keall

Comments and questions
34

NBR: "Earlier this week, Telecom announced an aggressive new $19/month plan, which seems to be squarely aimed at winning back those who have defected to 2degrees."

A case of slamming the stable doors, well after the horse has bolted. These Telecom marketing whizz kids must've been imbibing alcopops by the truck-load, prior to the closing of CDMA. There was the real possibility of mass defections after July 31st, and Telecom did nothing by the way of customer-retention?!

The $19/month plan sounds plaintive and forlorn. The dudes need to get their act together -- once they stop choking on the dust.

The $19 plan has already been topped

Hang on, so ARPU was up, and they reduced zero value customers. And the market results were in line with expectations... Yet this is seen as a negative result? I hope all the haters don't have a Kiwi Saver since how could they live with themselves getting earnings per share for their retirement from the only NZ listed Mobile Telco whereas VF and 2D return profits to who again?

Even beyond the CDMA actives, there was a net loss of 187,000 mobile customers (as noted in the article).

The again in ARPU was positive, but to a degree artificially inflated by the CDMA shutdown.

For the sake of customers and competition, I hope Telecom, 2degrees and Vodafone perform sharply.

As noted in the story above, Telecom is moving on budget plans, and seems to be shaping up for a front-foot 4G play.

But surely losing customers which cost you money to competitors is better than keeping them?

My maths must be off, since that's not how the report goes when I read it https://www.nzx.com/files/attachments/162049.pdf (Page 39)

But shouldn't we as shareholders be grateful that the Brogue Rogue has gone (finally) and now we can get on with real people?

Possibly also hurt by the focus on structural separation which was what got Reynolds his bonus payments.

It looks like 2Degrees is hurting Telecom like Vodafone did - when it had the jump on the youth market with text messaging (GSM). The "youth" soon end up in SME's - often shaping which Telco's to go with.

A dangerous place to be - Telecom needs to define its place in the mobile market all over again.

BAHAHAHAHAHAHAHAHAHAHAHA!!!

this speaks volumes about the lack of traction from Skinny as well as the near complete lack of strategic thinking around the CDMA closure. To all intents and purposes Skinny is invisible - this has to change if Telecom is to head off 2degrees and stop ongoing churn to competitors in the ciritical youth segment.

Ironically 2degrees non contract post pay offering with roll over minutes may seem ugly to an insider but customers are voting with their wallets.

This is where connection reporting is a farce - revenue share is what is important. If you look at the announcement, mobile revenues across Geni and Retail were up 11.1%. This is the key number. Average revenue per connection on CDMA was around $1, whereas post the change ARPU was $29. This gives Telecom a very high quality of customer base - and Voda should be worried. Sure its not great to lose customers, but surely better to lose the low value ones than the high value ones?? Of course that would not be interesting news Mr Keall

The ARPU uplift is noted in the story.

All the carriers like high-yielding contract customers.

But like its competitors, Telecom is also targeting the value customers who make up two-thirds of the market.

Specifically, with its new $19 Big Value plan.

As noted, it's also attacking the other end of the market, with some business customers on a 4G trial.

But as *not* already noted in the story, the $19 BIG Value plan has already been responded to. :-)

ARPU is mentioned, but total revenue is not mentioned anywhere in the story Chris - and an 11% increase is not small change.

Even the ARPU increase is buried under a large number of words about how many customers have dropped. What's 2 degrees ARPU?

I am not sure Skinny numbers are included? Journalist would be better off finding out that than creating a negative focused story.

I've since had the opportunity to ask acting CEO Chris Quin if any Skinny customer numbers or financials would be broken out. They won't.

He note the number of Skinny retailers would be increased from 400 outlets to around 800 by the end of the year.

Telecom has defined its place in the mobile market - smartphone postpaid and business customers. Gee isn't it terrible they've tried to get the customers that pay the most money per month for mobile use - what were they thinking!!!!

Telecom said this morning it will continue to push hard in the smartphone market, which is sensible.

But it has also said this week it will heavily promote its new $19 pre-pay plan over the next month.

That's sensible too. Telecom is a big player. It has to cover the whole spectrum of the market.

What would be interesting to know is how much of Voda's 2.37m customers would be similar in profile to the old CDMA network customers. Might change the picture somewhat

Speaking for myself, I tried very hard to remain a Telecom contract customer when the CDMA network closed. In fact, for some two years I tried to get the to provide a G3 phone that actually worked in my area. Every time I spoke to some bright, enthusiastic new person, they promised to sort it out then, as they got enmeshed in Telecom's bureaucracy, they lost heart.

Two days ago, I switched to 2Degrees who, by comparison, were helpful and efficient. Above all, I have a phone that works - something Telecom were unable or unwilling to provide.

For me, this marks the end of over 20 years as a customer with Telecom. During that time, they have managed to lose my business on three land lines, broadband and three mobile phones. Lack of customer service was a significant factor every time.

sounds like the're well rid of you - whinging nana

LOL Thanks, Rex - I'm not sure it's 'whinging' to ask for customer service - maybe if more people did it, Telecom and some of the other large organisations in this country might be more responsive. But yes I'm sure you're right - they're glad to be rid of a customer who asks for something as difficult as a phone that works within 5 minutes of Albany centre.

"Skinny" is terrible branding; the connotations are off-putting. It is anaemic as it is insipid.

Milked its monopoly too hard and created long-lasting negative goodwill.

Correct, also monopolies develop a psyche that is very very hard to get rid of. You see it in Gov. departments and councils. It is also in Fonterra, a hangover from the old dairy Board.

My old CDMA fone was one of those that fell of the end at close down. However it had been replace when XT opened with a new fone and number.. The old CDMA was just a spare until closure..

I have 5 CDMA phones non one from Telecom contacted me and I received nothing in the post.

Sorry - what do you mean you "received nothing in the post"? Were you expecting something in the post? Had you actually been using those 5 CDMA connections regularly?

All 5 idle, I bet.A

My wife is starting her own business so I did a compare and contrast on the plans available - voda and tcom were not even in the hunt. Sharpen your pencils and bleed some more money Vodatel!

Revenues in mobile being up is also a little misleading - you first need to look at what has occured in the pay monthly market in the last year - firstly the introduction of the $0 upfront smartphones - so people go from prepaid to $80 / month plans to get an iphone. Revenues go up, so does ARPU - but the flowon effect on COGS and contract downgrades / full churn is not so widely talked about - as such Telecom's on account stratgey is merely a very short term boost.

If Telecom dropped their prices to more closely resemble 2Deg's prices I might let them into the little secret of why I shifted to 2Deg after the CDMA network closed down.

Sadly for Telecom someone has missed the importance of service and valuing customers. What we are seeing is the result of poorly managed and non co-ordinated straegies and marketing plans across their full range of services. Surely someone in that organisation will start listening to thier customers as the sound of the footsteps leaving get louder.
Too late for all my business - they had their chance but no one cared.

LOL @ TELECON!!