4G on the up, down under - Australian 4G-LTE subs to hit 2M by 2013; Telstra driving market

The number of 4G-LTE users in Australia is accelerating with the country on track to surpass 2 million connections by the end of the next year, according to the latest GSMA Intelligence forecasts. Market-leader Telstra is expected to account for about three quarters of the Australian 4G market by this point (Q4 2013).

Number-two operator Optus switched on its first LTE networks for consumers this month, providing the first 4G competition for Telstra, which has been live since September 2011. The country’s third operator, VHA, is due to launch next year.

SingTel-owned Optus is launching this month in Sydney, Melbourne, Perth and Newcastle, the start of a planned nationwide rollout. Like Telstra, Optus is deploying LTE at 1800 MHz using refarmed 2G spectrum while it waits for digital dividend (700 MHz) spectrum to become available. Optus has also recently completed the acquisition of local WiMAX operator Vividwireless with the intention of using its 2.3 GHz spectrum for a supplementary TD-LTE network.

At the end of its latest fiscal year (ending June 2012) Telstra announced it had sold 375,000 4G devices (113,000 smartphones / 262,000 MBB devices) since launching the network nine months earlier – a figure that represented about 3 percent of its total mobile customer base at end Q2 2012 (see table). That figure reportedly passed 500,000 in August (160,000 smartphones / 340,000 MBB devices).

The market leader has pledged to spend AUD1.2 billion expanding 4G coverage from 40 percent of the population to 66 percent during its current fiscal year (ending June 2013). The network complements its ‘Next G’ network, which runs at 850 MHz and boasts 99 percent population coverage. Launched back in 2006, Next G was one of the world’s first HSPA networks and Telstra had migrated 84 percent of its base onto this network by Q2 2012, according to GSMA Intelligence. This enabled it to recently shut down an earlier 3G 2100 MHz network known as 3GIS, which it had operated as a JV with Hutchison (now one half of VHA). Sites are to be split between the two former partners and recommissioned with new equipment.

Alongside compatible dongles and hotspots, Telstra currently has four 4G-LTE smartphones available, the Samsung Galaxy S2 4G and three HTC phones – the One XL, Velocity and Titan. Current smartphone plans start at AUD60 per month on two-year contracts with 1 GB of data per month included.

The LTE version of Samsung’s flagship Galaxy S3 will be available via Telstra from October - though Optus will be the first Australian operator to offer it as part of its initial 4G launch this month. Optus’ cheapest plan also costs AUD60 per month, offering a greater monthly data allowance than Telstra (1.5 GB) but charging an additional AUD7 "monthly handset repayment" for the S3.

Meanwhile, VHA – the firm behind the Vodafone and 3 brands - is close to completing a AUD1 billion two-year 3G upgrade using 850 MHz spectrum, and does not plan to migrate to LTE until next year at the earliest. It is offering dual-carrier HSPA+ from this month, branded as ‘3G+’. It claims the new network is eight times faster than its regular 3G network, but it currently offers only one device able to take advantage of the faster speeds, the latest iPad.

VHA has been the poorest performer in terms of subscriber growth recently, its connections base declining by 5 percent over the last year to 6.8 million – a situation blamed on network problems and a reputation for poor customer service. Hutchison Telecoms Australia recently reported an AUD131.3 million net loss for 1H 2012, implying that VHA as a whole (with Vodafone’s half included) recorded a half-year loss of about AUD260 million.

Matt Ablott, Analyst, GSMA Intelligence:

For the latest wave of operator LTE launches, the availability of compatible (and attractive) handsets is becoming less of an issue, a point underscored this week with the launch of the new iPhone which will be coming to both Optus and Telstra’s LTE networks later this month. That’s not to say that Telstra hasn't benefited from a first mover advantage by launching a year ago. Telstra grew its mobile base by 13 percent during FY2012 (over twice the overall market rate) with 4G-powered MBB a key growth area. Revenue at Telstra’s mobile unit surged 8.5 percent (to AUD8.7 billion) over the period and now accounts for over a third of total group sales, which rose just 1.1 percent to AUD25.4 billion. Telstra’s plan to expand LTE coverage to two thirds of the population is aggressive, but it has freed up plenty of capacity on the 1800MHz band by migrating much of its 2G base to Next G – and the new network will also serve to relieve the pressure on Next G in urban areas by upgrading MBB users to 4G equipment. As unlimited data tariffs are not widely offered in Australia, the country’s operators should largely avoid the problems faced in many other mature markets in migrating subscribers used to ‘all-you-can-eat’ over to tiered and capped 4G plans. As such, we forecast accelerating 4G connections growth in Australia to continue well into 2013 as LTE competition increases, new spectrum becomes available and many more attractive devices are introduced.

Australia mobile connections, Q2 2012
Source: GSMA Intelligence, company data