Chairman’s Message

chariman1I am pleased to provide you with the summary of our performance in the first half of 2016, when we continued to see improvement in Vodafone Hutchison Australia’s business.

HTAL reports a statutory net loss of $65.7 million for the half-year ended 30 June 2016, representing $24.4 million improvement in the net loss in the corresponding period last year.  HTAL accounts for its investment in VHA using the equity method of accounting. The VHA results (including revenue and operating costs) are included in the “share of net losses of a joint venture accounted for using the equity method” in HTAL’s consolidated statement of profit or loss and other comprehensive income. Under this method, revenue from VHA’s ordinary activities is not included in HTAL’s consolidated revenues from ordinary activities.

HTAL’s revenue from ordinary activities represents interest income received on loans to VHA. HTAL’s revenue from ordinary activities for the first half of 2016 increased from $2.4 million in the corresponding period last year to $3.6 million. The increase in shareholder loans provided to VHA in February 2015 and May 2015 contributed to the higher interest income for half-year ended 30 June 2016.

HTAL’s share of VHA’s EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) rose 7.7 per cent to $206.0 million on the back of this customer growth. As previously advised, the Australian Competition and Consumer Commission’s reduction of industry mobile termination rates (MTR) resulted in a decline in revenue. From 1 January 2016, all carriers’ mobile termination rates declined from 3.6 cents per minute to 1.7 cents per minutes for calls, and from 7.5 cents to 0.03 cents per message for SMS. HTAL’s share of VHA’s total revenue decreased 9.7 per cent and as a result, ARPU is down 4.3 per cent. However if incoming revenue which has been impacted by the change of MTR is excluded, the total revenue increased by 4.5 per cent. There has been no material impact on VHA’s EBITDA as a result of MTR changes, due to the fact that lower incoming revenue has been offset by a corresponding decrease in interconnection costs.

There was continued improvement in loss position, with HTAL’s share of net loss of VHA down 25.3 per cent compared to same period last year resulting from the improvement in EBITDA and reduced depreciation and amortisation.

VHA highlights

VHA has produced another pleasing performance in the first half of 2016, with solid growth trends continuing. As the company strengthens and matures, VHA has established a clear identity and role in the Australian market to provide Australian customers with the freedom and choice to connect in the way they want.

Key highlights of VHA’s performance include:

Continued growth in customer numbers

VHA’s total customer base reached 5.5 million, a 4.5 per cent lift year on year. The rise was driven by continued growth in VHA base of 2.6 per cent and a large increase in wholesale (MVNO) customers by 28.6 per cent. VHA’s Red plans, which include popular products such as $5 Roaming, supported a 4.2 per cent increase in postpaid customers.

Expanding, enhancing and promoting the VHA network 

VHA continues to invest in the expansion, reliability and functionality of its network. VHA’s 4G network now reaches more than 22 million Australians, following the completion of the 850 MHz spectrum re-farm which converted 3G to 4G across the country.

Empowering customers to connect the way they want

A key driver of VHA’s solid performance in a highly competitive environment is its ‘worry-free’ products which continue to attract consumers and give them the confidence to use their smartphone with ease.

Customer sentiment continues to rise and complaints remain lower than industry average

Customer satisfaction with VHA remains high with VHA’s overall NPS continuing to track well, increasing 18 points between June 2015 and June 2016.  VHA’s ratio of complaints to the Telecommunications Industry Ombudsman was 41 per cent lower than the industry average for the June 2016 quarter.

Enterprise division marks twelve months in market 

VHA continues to drive competition in the telecommunications business sector, marking twelve months since re-entering this competitive segment of the market. Focussing on the small to medium business and enterprise segments, VHA continues to differentiate in the market by leveraging its global strengths, and delivering personalised value. As a result, the division is performing solidly.

Fast-tracking cancer research using mobile technology

The Vodafone Foundation supports charities to improve the health of Australians using mobile technology. Launched in November last year, the award-winning DreamLab app supports research by the Garvan Institute of Medical Research to group cancers based on their genetic profile so personalised treatments can be identified.

Driving telecommunications policy reform

VHA continues to be an active and vocal advocate for telecommunications policy and regulatory reform in Australia to reduce barriers to effective competition, particularly in regional and rural areas.

Outlook

VHA is well positioned for the remainder of 2016, with the solid growth trends of the past four consecutive half year periods expected to continue.

This will be largely driven by continued growth in the postpaid segment, flowing through to EBITDA and underlying revenue growth. VHA’s prepaid performance is expected to remain solid and follow seasonal trends of higher growth in the second half of the year due to an influx of overseas travellers during the Australian summer. The changes to Australia’s mobile termination rates will continue to have an impact on VHA’s incoming revenue and interconnection costs, however it is not expected to have a material impact on VHA’s EBITDA.

VHA will remain focussed on network expansion and enhancement, complemented by ‘worry-free’ way they want.

VHA will also continue to advocate for a fairer telecommunications policy and regulatory framework which encourages investment, innovation, competition and better customer outcomes.

HTAL remains committed to its investments in VHA, and will continue to support VHA’s growth and profitability in the future.

CanningFOKsig[1]

FOK Kin-ning, Canning
Chairman