We reported a $37.6 million loss for the year ended 31 December 2017, compared with a loss of $63.5 million in the prior year. The Company’s share of VHA’s net loss included in these results was $42.5 million compared with a net loss of $68.0 million in 2016.
HTAL’s revenue from ordinary activities represents interest income received on loans to VHA, and increased from $5.8 million in 2016 to $6.2 million in 2017.
No dividend was declared or paid by HTAL during the year.
In 2017, VHA achieved another year of solid financial growth, while maintaining and enhancing its strong mobile network, launching fixed broadband services, adding to its range of competitive mobile products, and further strengthening customer sentiment.
With strong support from HTAL and its joint shareholder Vodafone Group Plc, VHA has again performed well in an increasingly competitive environment, reinforcing VHA’s place in the market as a challenger and customer champion.
Key achievements and highlights:
- Continued significant investment in network and technology;
- Further growth in customer numbers, EBITDA and revenue;
- Launched fixed broadband services via the National Broadband Network;
- Ended 2017 with leading Net Promoter Score among Mobile Network Operators;
- Brought innovative post-paid and pre-paid mobile services products to market;
- Continued growth in roaming revenue;
- Continued focus on Enterprise segment;
- Vodafone Foundation DreamLab app launched on iOS, expanded globally; and
- Improved loss position.
VHA 2017 financial results
VHA produced a solid financial performance in 2017. It continued to take a sustainable approach to pricing, while encouraging customer retention and new customer growth through innovative products which offer value and generous inclusions to consumers.
On the back of customer growth, HTAL’s share of VHA total revenue increased
3.4% to $1,729 million.
In an increasingly competitive market,
gross ARPU remained steady at $45.80,
a decrease of 0.2%.
HTAL’s share of VHA’s EBITDA increased 6.5% to $485.9 million for the full year, driven by revenue growth and commercial optimisation.
Operating free cash flow also continued to increase, driven by the increase in EBITDA.
The loss position continued to improve with HTAL’s share of VHA net loss declining 37.5% to $42.5 million, driven by the increase in EBITDA.
Further customer growth, strengthening of consumer sentiment
VHA achieved further growth in its customer base during 2017, with the addition of 246,000 customers, and continued to see positive customer sentiment strengthen. Total network customers increased 4.4% to 5.81 million on the back of a 27.9% rise in wholesale and partner customers, 1.0% lift in postpaid customers, and 3.5% growth in prepaid customers.
In a sign of strong brand health, VHA ended 2017 with the leading Net Promoter Score (NPS) among the Mobile Network Operators. VHA’s NPS, which measures how likely customers are to recommend VHA products and services to others, increased a further two points throughout 2017. VHA’s NPS performance is driven by customer perceptions of network performance and reliability, trustworthiness, customer control over spend, and value for money.
VHA also recorded the lowest rate of customer complaints to the Telecommunications Industry Ombudsman of the major telecommunications companies throughout 2017. In the December quarter, VHA’s complaints ratio was 44% lower than the industry average.
Investing in a network for the future
In 2017, VHA’s total network and technology spend totalled almost $2 billion. VHA’s significant, on-going investment in metropolitan and regional areas drove continued growth and expansion of its network as customer data usage continued to grow, increasing 38.8% from 2016 to 258 million terabytes in 2017. VHA built 347 new sites and upgraded over 1,600 existing sites across the country. This included the construction of 23 new sites as part of the Australian Government’s Mobile Black Spot Program.
The VHA mobile network also continued to be recognised for its high performance in various independent network testing. The P3 Public Benchmark networking tests, Ookla Speedtest data and Open Source State of the Network report showed VHA’s network performance continues to improve, with VHA leading in several categories and locations.
In December 2017, VHA acquired licences for three lots of additional spectrum at a spectrum auction held by the Australian Communications and Media Authority. VHA invested $7.2 million in licences for
2×10 MHz of spectrum in the 2100 MHz band in both Hobart and Darwin, and
2×5 MHz in the 1800 MHz band in regional Western Australia. The new holdings will enable VHA to further improve its network for customers in these areas.
VHA successfully conducted Australia’s first demonstration of Massive MIMO (Multiple Input Multiple Output) using FDD (Frequency Duplex Division) spectrum bands, also known as 4.9G. The demonstration achieved cell throughput speeds of 717Mbps across eight devices and is a significant step for the network in the lead-up to 5G.
Changing the fixed broadband game
In December 2017, VHA entered the
fixed broadband market, launching Vodafone nbn™. In a strategic business move, Vodafone nbn™ will complement VHA’s mobile network and deliver a converged internet experience to meet growing consumer demand for
To differentiate itself in the market and provide a superior customer experience, VHA announced a number of unique initiatives as part of its fixed broadband offering, including Vodafone Wi-Fi Hub™ Modem featuring 4G Back Up At Sign-Up, customers are provided with the modem which allows them to connect to the VHA 4G mobile network until NBN is installed. The modem also automatically switches to mobile in the event the NBN connection fails.
VHA also carries out speeds checks at customers’ premises after connection to ensure they are not paying for a speed which is not achievable, and allows plan changes at no extra cost once per billing cycle.
Vodafone nbn™ is initially available online, over the phone or in 78 stores across Sydney, Canberra, Melbourne, Geelong
VHA continues customer focus
In an increasingly competitive environment, VHA continued to challenge the market by introducing new competitive offers and innovative products.
VHA revolutionised the post-paid category in Australia by introducing new Red Plans which separate handset costs from plan costs. In line with VHA’s purpose, which is
to give customers the freedom and choice to connect the way they want, VHA’s no lock-in contracts allow customers to pay off their devices over 12, 24 or 36 months, interest-free.
In response to customer feedback, VHA became the first mobile provider to introduce 35-day recharge periods. This initiative led to customer base growth in the pre-paid segment.
Customer data usage continued to grow, increasing 38.8% from 2016 to 258 million terabytes in 2017.
VHA also expanded its popular $5 Roaming product, which allows customers to use their plan inclusions in over 55 countries for an extra $5 per day, to eight new destinations. The new destinations are: Israel, Taiwan, Chile, Sri Lanka, Nauru, Jersey, Guernsey
and Isle of Man.
VHA’s roaming revenue increased 19% from 2016 to 2017.
VHA also added new features to enhance the customer experience. Vodafone Wi-Fi Calling allows Vodafone customers to make and receive calls, MMS and SMS from their compatible smartphone over an accessible Wi-Fi network, while Vodafone NumberSync enables customers to share their mobile services plan and phone number with their compatible iPhone and Apple Watch Series 3 (GPS + Cellular).
In 2017, VHA engaged with the Australian community through a strong roster of targeted, relevant sponsorships. Through prominent branding at popular sporting events and association with popular sporting codes, the sponsorships promote the Vodafone brand to new audiences.
Re-entering into a relationship with Supercars, VHA assumed the role of naming rights partner for the Porsche safety, course and medical cars, complementing its Official Telco Partner status of the 2017 Supercars Championship. VHA took on the role of naming rights partner of the Vodafone Gold Coast 600, a weekend-long motor sports event attended by almost 200,000 fans.
In a major four-year deal with Super Rugby, VHA secured competition naming rights until 2020, and back-of-jersey sponsorship of the Australian women’s XV side, the Wallaroos.
VHA also entered into a three-year sponsorship agreement with cricket’s Big Bash League and Women’s Big Bash League Adelaide Strikers.
A focus on small and medium businesses
VHA accelerated its Enterprise strategy in 2017, building on its award-winning offerings for small and medium sized business customers. VHA signed major business customers across a variety of industries including food and beverage, global logistics, and finance. In August, VHA won the Canstar Blue award for Most Satisfied Customers – Small Business Mobile Phone Providers 2017.
VHA launches Australia’s first Narrowband Internet of Things network
In October 2017, VHA launched Australia’s first Narrowband Internet of Things (NB-IoT) network in Melbourne, Victoria, with plans to expand the network into other areas in 2018. The key benefits of NB-IoT include extended coverage over large areas, even when devices are underground or deep within buildings, and greater power efficiency so devices can run on batteries for ten years or longer on
a single charge.
Leveraging Vodafone’s global position as a leader in IoT services and technologies, NB-IoT will enable the wireless connection of millions of devices with low bandwidth requirements, opening up opportunities for industries including utilities, smart cities and health.
Committed to a fairer telco playing field
Throughout 2017, VHA accelerated its telecommunications policy and regulatory reform to improve access and reliability for all Australians, particularly those in regional, rural and remote areas. The Australian mobile market is unique internationally, and is characterised by an extreme geography and a dominant incumbent which has benefited significantly from a legacy fixed network and significant ongoing government and industry funding and subsidies. This has resulted in a mobile monopoly in regional Australia of over 1.4 million square kilometres, which has flow-on effects in other areas.
In December 2017, VHA welcomed the Australian Government’s announcement that the Universal Service Obligation, which currently sees $297 million per year in taxpayer and industry funding provided to the incumbent for its copper and payphone services, will be wound up by 2020. This follows resolute calls for reform from VHA and other parties over recent years.
VHA ended 2017 with the leading Net Promoter Score among the Mobile Network Operators.
Despite the Australian Competition and Consumer Commission’s decision in October 2017 to not regulate domestic roaming, VHA maintains the current market distortion still needs to be addressed. VHA remains committed to the objectives of its agenda to achieve improved outcomes for Australian telecommunications customers.
Vodafone Foundation’s Dreamlab app launches on iOS, goes global
In October 2017 the Vodafone Foundation released a DreamLab app for Apple’s iOS devices. DreamLab uses the processing power of idle smartphones to help the Garvan Institute of Medical Research speed up vital cancer research. Since Dreamlab was first launched on Android devices in 2015, it has crunched over 25 million calculations and is currently nearing completion of its first research project to find safer and more effective treatments for cancer patients.
Following its success in Australia, DreamLab has been chosen as the Global Vodafone Foundation’s flagship program and will be rolled out to several markets in Europe and the Middle East in 2018.
VHA is well-positioned to continue its financial and customer growth, building on momentum of recent years. Despite an increasingly competitive market and significant barriers to competition in regional areas, VHA has established a reputation for its strong mobile network and as a customer champion both in the product and regulatory spaces.
In 2018, VHA will continue to invest heavily in growing and enhancing its business, with a focus on its mobile network, fixed broadband services, Internet of Things technology, 5G and Enterprise. VHA will continue its preparations for 5G with the final stages of its fibre transmission rollout, by evolving and building capability in its network, and through further technology trials.
VHA will also continue to expand its 4G network through its own investment and as part of the Australian Government’s Mobile Black Spot Program, and confirm a significant increase in mobile coverage as part of its joint venture agreement with a third party.
The convergence of fixed and mobile internet services will be a key area as VHA expands its fixed broadband business, offering Vodafone nbn™ to more homes and businesses. VHA will also continue the digitisation of the company to create a more agile organisation and an enhanced customer experience.
Just as it has done over recent years with propositions such as $5 Roaming, no lock-in postpaid handset contracts and 35-day prepaid expiry periods, VHA will continue to introduce new products which offer generous inclusions for customers to meet growing demand for services and deliver a financial return.
VHA remains committed to its policy and regulatory agenda to bring increased competition and choice to regional Australian customers. It will continue to put forward constructive ideas to government and other decision-makers about policy and regulatory reform to achieve maximum benefits for consumers.
The Australian Communications and Media Authority has indicated it intends to bring licences for the 3.6 GHz spectrum band to market via auction in 2018. This is to be followed by auctions in 2019 for 850-900 MHz, 26 GHz and 1.5 GHz band licences in 2019. VHA is engaged in a sustained initiative to optimise its position in the spectrum allocation process.
VHA has raised concerns about 5G spectrum availability given that other countries have identified far larger quantities of 5G spectrum than are likely to be available in Australia. VHA will continue to advocate strongly for sufficient spectrum to be made available at the right time to ensure consumers receive the full benefits of a competitive 5G environment.
HTAL remains committed to its investment in VHA, and will continue to support VHA’s growth in the future.
FOK Kin-ning, Canning