3 q11 australia mobile operator forecast executive summary

3Q.2011 Australia Mobile Operator ForecastAustralia to have 36.9 million mobile subscriber connections in 2015 with Optus taking 30% market share

October 2011

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© 2011 IE Market Research Corp.All rights reserved.

Source: IEMR

INDUSTRY AVERAGE SUBSCRIBER GROWTH IN AUSTRALIA’S WIRELESS MARKET IS INCREASING

The operator-wide average subscriber growth (YoY) was 11.2% in 2Q.2011, up from 9.1% in 2Q.2010.

The largest operator, Telstra, saw its subscriber growth (YoY) rise from 3.6% in 2Q.2010 to 15.7% in 2Q.2011.

On the other hand, SingTel Optus’ssubscriber growth was 4.7% in 2Q.2011, down from 8.6% in 2Q.2010.

Subscriber growth at Vodafone Hutchison Australia (VHA) was 5.5% in 2Q.2011.

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Telstra SingTel Optus

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Virgin Mobile Australia Pty Ltd Industry Total

Chart 1: Subscriber Growth (4Q08 – 2Q11), %

Stable subscriber growth continues in Australia11.2% industry average subscriber growth in 2Q.2011

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Source: IEMR

THE INDUSTRY AVERAGE ARPU IN AUSTRALIA IS STABILIZING

The industry average monthly ARPU was US$ 52.26 in 2Q.2011, up +0.1% YoY.

At the operator level, Vodafone Hutchison Australia’s monthly ARPU increased by 8.1% (YoY) to reach US$ 56.07 in 2Q.2011.

On the other hand, ARPU growth (YoY) at Telstra declined from 2.5% in 2Q.2010 to -2.6% in 2Q.2011.

ARPU at VHA is now higher than ARPU at Telstra and SingTel Optus.

Chart 2: ARPU Growth (4Q08 – 2Q11), %

ARPU growth in Australia is now positive+0.1% industry average ARPU growth in 2Q.2011

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Telstra SingTel Optus Vodafone (VHA) Hutchison Industry Total

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Source: IEMR

The operator-wide average Minute of Use (MOU) per subscriber was 217 minutes per month in 2Q.2011, down-5.9% YoY.

MOU/Sub at SingTel Optus continues to be higher than MOU/Sub at Telstra and VHA.

MOU per subscriber at VHA, Telstra and SingTel Optus were 232 minutes, 184 minutes, and 282 minutes respectively in 2Q.2011.

Chart 3: MOU/Sub Growth (4Q08 – 2Q11), %

Minutes of Use per Subscriber is decreasingIndustry average MOU/Sub is about 217 minutes per month

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Source: IEMR

+4.1% INDUSTRY-AVERAGE EBITDA GROWTH IN 2Q.2011

• The industry average EBITDA growth rate (YoY) in 2Q.2011 was 4.1%, down from 5.4% in 2Q.2010.

• All of the major three operators enjoyed positive EBITDA growth (YoY) in 2Q.2011.

• EBITDA growth rate (YoY) at Telstra was 5.9% in 2Q.2011 (up from -0.9% in 2Q.2010).

• VHA’s EBITDA growth (YoY) was 5.0% in 2Q.2011 (down from 17.4% in 2Q.2010).

Chart 4: EBITDA Growth (4Q08 – 2Q11), %

Positive EBITDA growth at all of Telstra, SingTel Optus and VHA in 2Q.2011

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Source: IEMR

Chart 5: Subscribers by operator (CY09 – CY15F)

So what is IEMR’s Forecast? Total mobile subscriber connections in Australia to reach 36.9 million in 2015

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Telstra SingTel Optus Vodafone Hutchison Australia

We forecast that the number of total wireless subscriber connections in Australia will increase from 28.3 million in the end of 2010 to 36.8 million in the end of 2015.

Given the latest quarter numbers, our model predicts that Telstra will have approximately 14.6 million mobile subscribers in 2015.

In our view, Telstra will continue to hold a dominant position in Australia with a 39.7% market share in 2015.

We forecast that SingTel Optus will have 11.2 million wireless subscribers in 2015 (30.3% market share).

We expect that the number of subscriber connections at Vodafone Hutchison Australia will continue to increase and reach 9.4 million in 2015 (25.6% market share).

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Source: IEMR

Chart 6: Average Revenue per User (ARPU) per month (CY09 – CY13F), AUD

So what is IEMR’s Forecast?ARPU levels in Australia to remain stable

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Telstra SingTel Optus Vodafone Hutchison Australia Average

WE EXPECT THE OPERATOR-WIDE AVERAGE ARPU LEVEL TO REMAIN AT APPROXIMATELY AUD 49 OVER THE NEXT TWO YEARS

Our forecasting model does not predict a major change in the industry average ARPU for the next two years.

The industry average ARPU will be AUD 49 per month in 2013.

We expect that VHA’s ARPU level will continue to be higher than those of SingTel Optus and Telstra over the next two years.

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Source: IEMR

Chart 7: EBITDA margins (CY09 – CY13F), %

So what is IEMR’s Forecast? Telstra to enjoy the highest profitability

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Telstra SingTel Optus Vodafone Hutchison Australia Average

Telstra will be enjoying the highest level of profitability in Australia’s wireless market during the forecast period.

Our model is predicting that Telstra’s EBITDA margins (calculated as EBITDA/service revenue) will be about 34% in 2013.

On the other hand, we forecast that SingTel Optus' EBITDA margin will be about 27% over the next two years.

VHA’s EBITDA margin will remain lower than those of its competitors at about 18% from 2012 to 2013.

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3 q11 australia mobile operator forecast executive summary

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