blog I’m not surprised, but I am somewhat disappointed, by Shadow Communications Minister Malcolm Turnbull’s implication in a blog post today that Australia’s mobile telcos can’t afford the money the Federal Government is (admittedly) attempting to gouge them for in the upcoming wireless spectrum auction. Writes Turnbull:

“… an article in the AFR, placed there no doubt by Senator Conroy’s own department … indicates that the Government is working hard to screw the very last cent out of the wireless carriers for the renewal of the spectrum licences they are currently using to deliver their services. There is a legitimate debate about how the renewal fees should be calculated and concern expressed by the industry that if the prices are set too high it will inhibit carriers in making the investments to deliver new wireless broadband services.”

Frankly, I think Turnbull is overlooking here the fact that Australia’s mobile telcos — Telstra, Optus and VHA are currently pulling fat buckets of cash out of the nation’s telecommunications sector and have been for some time. A quick look at Optus’ latest quarterly results shows the telco made A$2.2 billion in revenue in a three month period, with earnings before interest, taxation, depreciation, amortisation — EBITDA, a measure of a company’s operating cash flow — being A$556 million.

The overwhelming majority of that revenue — A$1.5 billion — came from Optus’ mobile division; and it was up 9 percent year on year. And if you look at SingTel’s underlying profit, the picture gets even starker; the company made S$891 million in net profit in the quarter, from a total of S$4.4 billion in revenues. The situation at Telstra is even better; and certainly VHA has similar deep pockets courtesy of its global Vodafone relationship.

In short, these are not small companies we are talking about; they are not without significant resources, and they do not need the protection of the Federal Shadow Communications Minister or the Government. If anything, both Optus and VHA should be criticised by politicians for a continued level of underinvestment in their mobile networks which has led over the past few weeks to a series of embarassing outages and ongoing poor performance.

Let’s get real about this: Australia’s mobile telcos can take care of themselves.

Image credit: Office of Malcolm Turnbull

Related posts:

1. Win govt, telcos tell Turnbull: Then we’ll talk
2. Aussie telcos seek iPad talks with Apple
3. Aussie telcos not using Carrier IQ
4. Did Apple shaft Aussie telcos on the iPad?
5. Telstra in mobile: Making out like a bandit

Tweet

1. Michael Wyres
   Posted 15/12/2010 at 2:44 pm | Permalink | Reply

   “Let’s get real about this: Australia’s mobile telcos can take care of themselves.”

   Yeah – aren’t Malcolm and the Coalition the ones telling us that the market should be taking care of the telecommunications landscape?

   Sounds like the market is doing just fine!

2. Simon Reidy
   Posted 15/12/2010 at 3:06 pm | Permalink | Reply

   Thankyou for highlighting the last bullshit to spurt forthwith of our favourite rich free marketeer Mr Turnball. Malcolm now tells lies with such ease that I think even he has trouble knowing what is real and what isn’t any more. He has one agenda: Make it as absolutely difficult as possible for the Labor government to achieve anything whatsoever; instead do as much as possible to fight them, show instability, and bring the government down.

   Therefore, I don’t even really listen to what he has to say any more, as he’s demonstrated that just like his rival and pal Mr Abbott, he is nothing but a lying prick. I give his comments as much credence as I do the drunk old guy down at the RSL. Which is a shame as I used to agree with a lot of what Mr Turnball had to say about Australia becoming a republic and his support for an ETS.. Look where that got him though…It really is sad to see him in such a pathetic position, knowing full well that he is smarter than the stupid things he is saying with such veracity.. That’s never a good look for a politician..

   • Renai LeMay
     Posted 15/12/2010 at 4:08 pm | Permalink | Reply

     Oh come on Simon, I don’t think it’s fair to describe Turnbull that way — he’s doing a great job in general as Shadow Comms Minister. He’s brought life to the debate and we have to appreciate that. I applaud him for his daily comments on the industry.

3. Anderson
   Posted 15/12/2010 at 3:13 pm | Permalink | Reply

   Pretty disingenous to claim 25% EBITDA on wireless revenue figures as high when NBN Co’s anticipated EBITDA is in the neighbourhood of 75%.

   Notice the ‘DA’ bit of the earnings and you’d find that depreciation on capital intensive and quickly obselete comms equipment is quite large and thus the real ‘net profit’ figure is not really that big.

   Not that I’m advocating subsidies to wireless sectors or anything like that. They should bid for the spectrum as usual but the govt shouldn’t be putting in minimum reserves or allow any single telco to effectively monopolize spectrum in any specific region.

   And there’s a certain conflict of interest here where its in Conroy’s best interest to slug non-NBN choices as much as possible (this is exactly why the government got out of the Telco market in the first place). There needs to be even more scrutiny than usual with govt actions in this area.

4. Malcolm Turnbull
   Posted 15/12/2010 at 3:31 pm | Permalink | Reply

   I am sorry you didnt have time to read the whole blog. I am not advocating the government subsidise wireless, simply pointing out the contradiction of taking an economically rational approach to wireless and seeking the best return for taxpayers in a spectrum sale and then throwing all of that economic principle out the window when it comes to fixed line broadband.

   • Renai LeMay
     Posted 15/12/2010 at 4:06 pm | Permalink | Reply

     hey Malcolm,

     actually I do understand the point you’re making; you’re basically accusing the government of being inconsistent, even hypocritical, in the way that it is handling the fixed and wireless markets.

     However, I don’t think it’s as easy to conflate the two as you’re suggesting; there is a technological difference, and the issues are a bit more complex than the rhetoric in your blog post would suggest. Furthermore, I disagree that we should be focusing on the overall policy goal at the moment, when the debate has shifted very clearly onto implementation of the NBN at this point in time, as well as implementation of the next generation of wireless standards.

     It’s time to make very specific arguments in this area; it’s not a time for bigger picture policy development. The Coalition had its chance to argue big picture policy development in telecommunications over the past few years; a chance it abdicated. I appreciate that you weren’t personally the Shadow Communications Minister at that point, but that doesn’t mean the debate should go backwards in the way you appear to be pushing for at the moment.

     I’d like to see the Coalition acknowledge that the NBN is now going forward, and modify its telecommunications policies accordingly to debate today’s issues. Otherwise, as an Opposition, you are risking becoming irrelevant.

     As you know, I personally am ambivalent about the NBN; but I’m not going to start arguing about its fundamental basis at this point. We’re beyond that.

     • Charles M
       Posted 16/12/2010 at 9:40 am | Permalink | Reply

       “I’d like to see the Coalition acknowledge that the NBN is now going forward, and modify its telecommunications policies accordingly to debate today’s issues”

       I strongly second the motion. It is depressing to see the degree to which the opposition is bogging down in the quagmire of political functionality instead of just pushing for the national good.
       I personally have never believed the job of the Opposition was to act as a henpecking shrew towards Government. I have always appreciated the Oppositions that created alternatives in a positive way. I have seen very little positive in policies come from the Liberals since the election, and that has been doing more harm than good for the country. Delaying the NBN instead of working with it can only cost money, time, and frustration on the part of those like Mr Quigley that are just trying to make it work, and is a disservice to the country.
       What ever happened to the Malcolm Turnbull that had the courage of his convictions and made us all proud?

     • R5000
       Posted 16/12/2010 at 6:12 pm | Permalink | Reply

       “I’d like to see the Coalition acknowledge that the NBN is now going forward, and modify its telecommunications policies accordingly to debate today’s issues”

       Thirded. Malcolm is a smart guy, and we could use him to make the NBN policy as sound as possible.

5. darryl adams
   Posted 15/12/2010 at 3:43 pm | Permalink | Reply

   You really cant compare wireless and fibre.

   frequency is a finite resource, so actioning it makes economic sense. It is also a shared resourse. You can make the same arguement for wireless spectrum as the mining royalty tax, with the same arguments against from the oposition.

   Fibre has a higher install cost, but once set up, is almost limitless in capacity. Adding new cable once the origional is laid is an order of magnitude cheaper, and newer tech can use fibre more eficiently. Unlike wireless, it is not a shared resource, more like power where you opt in to take benefit of it.

   So you realy cant compare the two

   • Michael Wyres
     Posted 15/12/2010 at 4:04 pm | Permalink | Reply

     This isn’t strictly an NBN issue Darryl, so I’m not sure why you’re bringing fibre into it.

     The only crossover here is wireless, and even that’s a vague cross over at best.

     Under the NBN, wireless is FIXED…it will be an antenna bolted onto your house, feeding into a basically identical NTU that a fibre or satellite NBN connection will be fed to. You don’t plug it into a USB port on your laptop and take it with you.

     For what it’s worth, I can’t see NBN Co having any obstacles placed in front of it to obtain access to the spectrum it will require to pull off the 4% wireless coverage specified for the NBN. They’ll just get allocated the required spectrum, and it’ll be for a fraction of the cost – (if any cost at all) – that a Telstra or Optus would pay for it.

     Malcolm is speaking about the mobile internet market here, a market which does not crossover anything the NBN would be addressing. Mobile internet will not go away in an “NBN world” – on the contrary I believe that it will grow significantly, and the market will soak up that growth like a bone-dry sponge dropped into a swimming pool.

     Many more services previously hampered by lack of bandwidth, would become massively more available in pure infrastructure terms in the so-called “NBN world”, and innovation will spark more services, and more need to access those services away from the office AND from the home.

     Enter mobile internet, and why the playout of new spectrum needs to be managed carefully.

     However, I do believe the market will sort this one out fairly safely by itself. But I like many, although an NBN-supporter, have an inherent permanence of cautiousness in relation to the “taste” of whatever pie Stephen Conroy sticks his fingers into.

     • Anderson
       Posted 15/12/2010 at 4:27 pm | Permalink | Reply

       There’s no financial difference between NBN Co getting the spectrum for free or it winning the spectrum auction.

       In either case the government’s financial situation doesn’t change at all.

       • Michael Wyres
         Posted 15/12/2010 at 5:51 pm | Permalink | Reply

         It still has nothing to do with MOBILE broadband…

6. Bruce
   Posted 15/12/2010 at 4:24 pm | Permalink | Reply

   Any fees charged for the spectrum will be passed onto end users as a cost of business, ie an indirect tax. As a nation do we gain from taxing ourselves into oblivion in order to maintain our public service paymasters at their current level of expenditure / waste or would we be better considering a lower fee structure for the greater public good.

   • Blake
     Posted 15/12/2010 at 4:37 pm | Permalink | Reply

     I dont think so, you will only get better deals for wireless.

     You can’t give this spectrum out for free, it is limited and they are going to make money off of it.

   • Michael Wyres
     Posted 16/12/2010 at 8:45 am | Permalink | Reply

     Say Telstra – (for example) – pays $500m for a chunk of spectrum. Say they charge end users $50 a month for a service using that spectrum, and $5 of that goes towards recouping that $500m investment. If they scrounged up 2 million customers, it would only take them 50 months – (4 years and 2 months) – to raise that $500m.

     And they’ve still got $45 per customer per month – (or $4.5b) – to spread around on other costs and for profits in those FIRST 50 months.

     I don’t think paying $500m or even a $1b for a chunk of spectrum is too unreasonable, quite frankly.

7. Blake
   Posted 15/12/2010 at 4:31 pm | Permalink | Reply

   Sounds like he is arguing for arguments sake. To have a different opinion, even though he contradicts what he has previously said and makes no sense in the process.

   The ISPs can afford it, and should definitely cough up, so that we the public can make some money.

   Make them pay.

8. Chris
   Posted 15/12/2010 at 5:27 pm | Permalink | Reply

   Not understanding his argument is not a reason to bash it!. The reason he make this statement is two fold.

   1. By increasing the cost of access to spectrum they artificially increase the competitiveness of the NBN
   2. Do you think this will decrease their profits? No, this will increase the costs. If it’s done over the board they will simply increase our cost to align with their new cost structure! On a simple value level they will make MORE money. This is because they are not governed by the Government but instead by the market and for every dollar invested the are expected to deliver a percentage return. So if you increase their costs they will be past directly to the consumer plus a percentage market up. That’s simply the way business works.
   3. This will discourage investment in new tower locations as the return on investment will be lower and thus not worth the investment

   Although Australia needs to get a good return on this spectrum it’s very inept to believe that any increase in cost at one end will not flow though to the other.

   Profit is NOT a bad word it is required for investment! Where do you think their money comes from? In Telstra’s Case Mums and Dads who bought into the Government sales pitch. Corporations are owned by people not rich billionaires. The money either comes from the investors pocket’s or the customers and at the end of the day any company I invest in I expect the person who pays to be the consumer!

9. Jay
   Posted 15/12/2010 at 7:05 pm | Permalink | Reply

   So in modern Australia the penalty for making a reasonable profit is for the government to hit hard and gouge exorbitant fees or exact impossible conditions? Mining, banks, and now a double-whammy for telcos (NBN was the first)? Typical anti-business Labor doctrine.

10. Sniper
    Posted 16/12/2010 at 2:16 am | Permalink | Reply

    Its ok for the liberals to gouge the consumers both wireless AND wired.
    the Wireless telco’s will only pay what they reckon the spectrum is worth,
    not and no less either.
    For someone who has been in the telco industry, turnball sure is clueless now.

11. Geoff McQueen
    Posted 16/12/2010 at 8:46 am | Permalink | Reply

    When the carriers stop charging a over million dollars per GB for SMS messages, I’ll consider any lobbying for “fairness” to be appropriate; right now, however, they should be bent over the barrel by our government the same way they bend us over the barrel every day of the week…

    • Dean
      Posted 16/12/2010 at 10:18 am | Permalink | Reply

      Heh, I never did that calculation before, but I just did it then. If you manage to send 1GB worth of SMS messages, it would cost you around $1.5 million…. wow!

      Makes the telco’s data roaming plans look positively value-for-money!

      • Geoff McQueen
        Posted 16/12/2010 at 10:54 am | Permalink | Reply

        Yeah, and is just another example of why they don’t deserve any love or special deals..