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Australia - Telco Company Profiles - 2nd Tier

Attention: There is an updated edition available for this report.

For those needing detailed overviews and statistics as well as objective analysis on all aspects of second tier market, this report provides essential reading and gives in-depth information on:

  • Company overviews and structure of the following: AAPT, Amcom, gotalk, iiNet, Internode, Macquarie Telecom, M2 Telecommunications, Nextgen Networks, TPG Telecom (Soul), TransACT, and Vodafone Hutchinson Australia (VHA);
  • Major divisions and subsidiaries;
  • Financial and operating statistics;
  • Marketing and financial analyses and strategic overviews;
  • Network overviews.
  In a separate report the following Australian companies are covered: Telstra and Optus.

The second-tier market is on the verge of massive changes which will occur over the next few years. The critical factors are what changes to the regulatory environment will occur, and even more importantly, how the National Broadband Network develops.

  Second-tier companies are likely to have to reposition themselves. Second-tier firms in Australia are usually virtual service providers to the mass market which purchase services on a wholesale basis from network operators. A number of second-tier firms are infrastructure operators of networks serving niche markets. Several second-tier firms offer a range of telephony services such as mobile and landlines, as well as Internet access. A second group consists of firms which offer only one type of telephony service such as Vodafone or 3 with mobile voice and data services.  

Four of the second-tier players: AAPT, Commander, Vodafone and Hutchison now have annual revenues exceeding the $1 billion mark. This report provides an analysis of the current outlook for the major second-tier firms as well as statistics relating to revenues and market shares. The second-tier segment is very interesting in terms of mergers and acquisitions in Australia. In 2009 Vodafone and Hutchison (3) in Australia, the third and fourth largest mobile network operators merged their operations. M2 acquired People Telecom in mid-2009 to create the largest firm without significant infrastructure assets, and further consolidation is expected over the period to 2011.  

Australia will be the first country in the world in which the industry will adopt a new plan for the future. In the past this was based on ad hoc decisions and there was little room for long-term planning. The market survived on the crumbs that fell from the Telstra table, and on regulatory relief, which often took many years to arrive and was often too late to help a starving competitive environment.

  Uncertainty was a major obstacle. All decisions depended on Telstra and there was little hope for individual initiatives. Those who developed their own independent plans quickly discovered that Telstra’s reach was long and deep. Good examples of this are TransACT in Canberra and the Unwired service. Even larger companies like Optus and AAPT (Telecom New Zealand) struggled to set their own course.

  The single most important element of the National Broadband Network (NBN) is that it will provide certainty about future direction. There will be problems, and the outcome will not be perfect, but for the first time individual companies are far more in charge of their own destiny.

  AAPTAAPT is Australia’s third largest telecommunications carrier offering local, national and international voice, data, mobile and Internet services to business, corporate, government and residential customers. AAPT is a wholly-owned subsidiary of Telecom New Zealand and is one of only three Australian telecom providers to own and operate its own national voice and data network.

  The company continues to struggle, especially on the business side. AAPT’s new strategy focuses around the mass market bringing business offerings to home and small businesses. Telecom New Zealand acquired PowerTel, and both AAPT and PowerTel were combined under the same operating structure. Its strategy is to deliver growth through the execution of on-net and service-layer strategies together with focused product and channel strategies. The on-net strategy is centred on leveraging proprietary network infrastructure to improve underlying economics. AAPT’s high-bandwidth fibre optic backbone links PoPs located in state capitals and regional centres, providing coverage to 98% of Australians. AAPT interconnects with Telstra in major exchanges to supplement its backbone infrastructure and for last-mile access to customers. In major cities and metropolitan areas AAPT delivers fibre optic cable to buildings of high-volume customers, broadband wireless LMDS to corporate and government users and DSL to SMEs. In 2007 AAPT launched a new ADSL2+ broadband service with access speeds of up to 20Mb/s. While in 2009 it completed a $30 million upgrade of its core Cisco and Alcatel IP network.

  Amcom Telecommunications LimitedAmcom is a second-tier telecommunications carrier providing fibre, DSL broadband, data centre and Internet services to the corporate, wholesale, government and SME markets. Amcom is one of the best placed telcos in the Australian market with excellent prospects for future growth and remains a well managed and focused business.

  Based in Western Australia, Amcom has constructed over 1600km of high-speed fibre optic networks in Perth, Darwin and Adelaide, accessing over 1175 buildings. The network provides access to around 80% of business premises in the three cities. Amcom has completed a DSLAM network rollout of 37 exchanges in Perth and Adelaide that capitalises on its existing fibre network. It has acquired a 22.5% stake in iiNet. Amcom claims that its recent revenue growth is a product of its fibre investments, driven by the recent resource boom. Earnings growth is expected to continue in 2010 on the back of buoyant market conditions.

  gotalkgotalk Ltd is a full service telecommunications company with sales in excess of $125 million per annum and operations in Australia and New Zealand. Since its establishment in 2000, the company has grown steadily through acquisitions and the creation of new products. For its prepaid services gotalk uses an Universal Recharge account for customers to better manage and share their spend across a range of prepaid mobile, Internet, broadband voice (VoIP) and phone card services all from the one account. gotalk postpaid products include fixed-line voice, mobile, broadband and dial-up Internet and VoIP.

  iiNet LimitediiNet was established in 1993 and listed on the ASX in 1999, growing from a small Perth business into the third largest Internet Service Provider in Australia. The company now provides 750,000 broadband, telephony and dialup services nationwide. iiNet’s goal is to lead the market with the best Internet access products and then differentiate with genuine, plain speaking customer service. The company has its own high-speed ADSL2+ network reaching around 4 million households across Australia, the largest VoIP network in the country, and is delighted to have led yet again with Naked DSL, recognised by PC User Magazine as the 2009 Product of the Year.

  InternodeInternode is an Australian owned national ISP. It provides fixed-line broadband, wireless DSL, WiFi, dial-up, VoIP and Ethernet services across Australia. Internode’s services utilise the Agile international network - a Tier One IP network with over 10Gb/s of connectivity to major US ISPs. As early as 2005 the company launched the country’s first ADSL2+ network and in conjunction with Agile Communications now operates over 120 DSLAMs.  

In this publication we overview Internode and outline the developing regional broadband infrastructure and services that Internode provides including the broadband services to the regional areas which include Murray Bridge, Port Augusta, Stirling North, the Coorong and the Yorke Peninsula. Internode, uses alternative broadband platforms including regional WiMAX networks and metropolitan WiFi hotspots. Strong growth is reported in the naked ADSL product line. FttH (Fibre-to-the-Home) was launched in greenfields housing development - delivering 100Mb/s residential services at less than $100 per month. We also outline newer developments including Internode’s entry into the mobile broadband market, a commercial Content Delivery Network for the distribution of media content and a commercial relationship with TiVo.  

Macquarie TelecomMacquarie Telecom is a supplier of ICT for the business and government markets. It provides a range of voice, data, mobile and hosting solutions to over 3,000 corporate and government customers. Macquarie’s data business provides data networking and hosting services to Australian business and government customers. Macquarie’s two key target markets are Australian mid-size corporates and the government sector. The company’s Metro Access Network supports voice, data, VoIP, DSL and Internet applications. Hosting and Data are a big focus of Macquarie’s strategy and its data centre is increasingly becoming more important. In 2010 BuddeComm expects that Macquarie may earn the bulk of its revenue from data and hosting services as voice revenues continue to decline.

  M2 TelecommunicationsEstablished in 1999 and listed on the ASX in 2004, M2 Telecommunications Group Limited (M2) is Australia’s largest network independent provider of fixed-line, mobile and data telecommunications services. It also provides fixed-line and 3G mobile services in New Zealand. M2 has shown significant growth over the past two years by means of acquisition. In the case of Commander and People, M2 was able to obtain them at bargain basement prices.  

Nextgen Networks Pty LimitedNextgen Networks is a telecommunications carrier that specialises in data services for carriers, service providers, government and corporations. Nextgen owns and operates Australia’s 3rd largest national fibre network of over 8,500km, fibre rings and Co-Lo assets in all capital cites and an extensive National Virtual Private LAN Service Switched Data Network. The fibre network runs between the country’s principal capital cities: Brisbane, Sydney, Melbourne, Adelaide and Perth, and has links to nodes in around 70 regional cities and centres. In 2006, it launched Australia’s first national VPLS. This was the first step in moving the company from the initial business plan of focussing on high capacity wholesale to becoming a full-data service provider to the broader Australian market. In 2008 Nextgen acquired the business and assets of Silk Telecom, which substantially enhanced Nextgen’s metro fibre footprint in Vic, SA and WA. While in late 2009 Nextgen was awarded a contract to supply the Department of Defence with high-capacity transmission services over a five-year term.  

TPG SoulTPG Soul is a provider of IP telecommunications and multimedia services in the Australian marketplace. Services including voice, Internet and data solutions are provided to a customer base ranging from the consumer market through to the SME, corporate and government sectors. The company has the largest data network and voice network after Telstra, the largest fully converged voice, video and data IP-based access network in regional Australia and the largest voice-enabled IP network. IPTV is included with ADSL2 packages and available at most TPG exchanges throughout Australia. The IPTV trials are looking at a pay TV-type model based on content for niche markets. In early 2008 Soul formally acquired ISP TPG.

    However, who really was in charge became clear when the company name was changed in December 2009 to TPG Telecom Limited. In addition Soul formerly acquired ISP Chariot in mid-2008. During 2009/10 the company is enabling over 60 new exchanges with the main expansion area being in Western Australia. In late 2009 it launched a merger with dark fibre and submarine cable operator Pipe Networks.

  TransACTTransACT Communications Pty Limited (TransACT) is a Canberra-based, privately owned company that builds and operates high-speed broadband communications infrastructure across the ACT region, including Canberra and surrounds. It delivers triple play communications services via voice, high-speed data and video. TransACT has built an advanced broadband communications network across the ACT, and also offers broadband services to Queanbeyan and other surrounding towns in southern NSW. Its subscription television service offers a real-time video-on-demand service, a range of content across some 60 channels, including movies and sporting programs. TransACT continued with its network extension by provisioning ULL to exchanges where the FttC network could not cover. In 2008 TransACT Communications acquired Victorian carrier Neighbourhood Cable from TVG and started rolling out its FttP network in Greenfield estates across the ACT region. While in September 2009, there were rumours that the government’s NBN Co might acquire TransACT to kick-start its national broadband plan.

  Vodafone Hutchison Australia Pty LtdVodafone Hutchison Australia was formed in June 2009 following the merger of Vodafone Australia with Hutchison Telecoms, each entity owning half of the new company. Vodafone Australia was owned by Vodafone Group Plc and won Australia’s third mobile carrier licence in 1992 and began operations in 1993. It became the third largest mobile carrier in Australia after Telstra and Optus. Hutchison Telecom is owned by Hutchison Whampoa (52%), Leanrose Pty Ltd (11%), Telecom NZ (10%) with the remainder held by the public. Hutchison, through its 3 brand, launched Australia’s first 3G network and services. It owns/operates a 3G WCDMA network - in Sydney, Adelaide, Brisbane, Gold Coast, Melbourne, Perth, Canberra, Werribee, Geelong, Campbelltown, Frankston and Wollongong. Both companies offer a comprehensive suite of mobile products to both domestic and business customers. In this publication we describe and analyse the merger, while also providing a brief history of the merging companies.

1. Market overview and statistics 2nd tier market
1.1 Overview of second-tier telecommunications market
1.2 Market analysis in 2009
1.2.1 The impact of the NBN
1.2.2 The transition period
1.3 Major second-tier firms
1.3.1 Vodafone and Hutchison
1.3.2 AAPT/PowerTel must look for successful merger
1.3.3 iiNet continues to perform strongly
1.3.4 M2
1.3.5 Primus continues to struggle
1.3.6 Macquarie Telecom
1.3.7 Soul acquires TPG and Chariot - but TPG is the winner
1.3.8 Amcom - a star performer in a growing niche market
1.4 Service revenues and market shares
1.4.1 Total market by major service
1.4.2 Total market by major players
2. National Broadband Network
2.1 Quo vadis?
2.2 NBN opportunities for the main players
2.2.1 Telstra
2.2.2 Optus
2.2.3 AAPT/Telecom New Zealand
2.2.4 Macquarie Telecom
2.2.5 Primus Telecom
2.2.6 Internode
2.2.7 iiNet
2.2.8 Amcom
2.2.9 TransACT
2.2.10 M2
3.1 Company information
3.2 Network information
3.2.1 Overview
3.2.2 National backbone network
3.2.3 National voice switching network
3.2.4 Data and IP network
3.2.5 PowerTel
3.2.6 CBD and metropolitan fibre rings and Fibre-to-the-Building
3.2.7 Upgrade of internal IP network
3.2.8 Hosted VoIP
3.3 Broadband access
3.3.1 Overview
3.3.2 LMDS wireless infrastructure
3.3.3 DSL network
3.3.4 ADSL2+ broadband network
3.4 International infrastructure
3.5 Company structure
3.5.1 Overview
3.5.2 Gen-i Australia (including re-alignment with TCNZA)
3.6 Financial results
3.6.1 Full year to June 2009
3.6.2 Operating statistics - 2009
3.6.3 Full year to June 2008
3.6.4 Operating statistics - 2008
3.7 Strategy overview
3.8 Company analysis
3.8.1 National Broadband Network
3.8.2 Is AAPT developing an exit strategy?
3.8.3 AAPT/PowerTel merger not delivering results
3.9 PowerTel - historic overview
3.10 Company history
4. Amcom Telecommunications Limited
4.1 Company information
4.1.1 Fibre division
4.1.2 Amnet division
4.2 Financial results
4.2.1 Financial results to June 2009
4.2.2 Financial results to June 2008
4.3 Company analysis
4.3.1 National Broadband Network
4.4 Network information
4.4.1 Fibre network overview
4.4.2 SABRENet agreement
4.5 Alliances and acquisitions
4.5.1 People Telecom sells Perth corporate data business to Amcom
4.6 Products and services
4.7 Company history
5. gotalk
5.1 Company information
5.2 Company activities and milestones
5.2.1 Acquisitions
5.3 Financial results
5.3.1 Financial results - 2009
5.4 Company operating statistics
5.4.1 2009
5.4.2 2008
5.5 Company structure
5.5.1 cardcall
5.5.2 gotalk communications
6. iiNet
6.1 Company information
6.2 Financial and operating results
6.2.1 Financial results
6.2.2 Subscriber statistics
6.3 Company analysis
6.3.1 National Broadband Network
6.4 Network and DSLAM rollout
6.4.1 Overview
6.4.2 Dark fibre
6.4.3 FttH
6.5 Acquisitions and alliances
6.5.1 Acquisition of ISP Westnet
6.5.2 Alliance with FOX Sports
6.5.3 Alliance with Hypernia
6.5.4 Alliance with Hybrid Television Services
6.5.5 Alliance with Hutchison
6.5.6 Amcom and PowerTel acquire stake in iiNet
6.6 Reselling agreements
6.7 Products and services
6.7.1 Home and SOHO
6.7.2 Business
6.8 Company history
7. Internode
7.1 Company information
7.2 Analysis
7.2.1 National Broadband Network
7.3 Network information
7.3.1 Domestic fixed network
7.3.2 Regional Australia
7.3.3 International network
7.3.4 WiFi network
7.3.5 Expansion activities
7.4 Operating statistics
7.5 Regional services - state government contracts
7.5.1 Coorong council - ADSL2+ network
7.5.2 Extension of SA Government contract
7.5.3 ADSL2+ service launch in Port Augusta
7.5.4 Internode rolls out solar-powered broadband to Coorong
7.6 Agile Communications
7.6.1 Agile wins Murraylands contract for broadband services
7.7 Products and services
7.8 Company history
8. Macquarie Telecom
8.1 Company information
8.2 Financial results
8.2.1 Total revenue
8.2.2 Revenue by division
8.3 Company analysis
8.3.1 Macquarie’s revenue growth subsides in a competitive voice market
8.3.2 National Broadband Network
8.3.3 ICT leader - Macquarie Telecom
8.4 Data network
8.4.1 Metro Access Network (MAN)
8.4.2 Mobile network
8.4.3 DSLAM rollout for ADSL2+ services
8.5 Services
8.5.1 Voice solutions
8.5.2 Data solutions
8.5.3 Hosting solutions
8.5.4 Mobile solutions
8.5.5 Satellite service
8.5.6 Management tools
8.6 Company history
9. M2 Telecommunications
9.1 Company information
9.2 Analysis
9.2.1 National Broadband Network
9.3 Financial results
9.4 Services
9.4.1 Fixed-line voice
9.4.2 Mobile
9.4.3 Internet
9.4.4 Brands
9.5 Organisation
9.5.1 Overview
9.5.2 Business Units - M2 Telecom (retail) and M2 Wholesale
9.5.3 Acquisition of People telecom - April 2009
9.5.4 Acquisition of Commander assets - June 2009
9.5.5 Acquisition of Unitel Australia - February 2008
9.5.6 Acquisition of Orion Telecom - September 2007
9.5.7 Acquisition of Tenex Communications - July 2007
9.5.8 Acquisition of Wholesale Communications - May 2007
10. Nextgen Networks Pty Limited
10.1 Company information
10.1.1 Company ownership
10.1.2 Regional broadband alliances - SP Telemedia
10.2 Recent developments
10.2.1 NewSat signs deal with NextGen Networks for Kimberley project
10.2.2 Department of Defence fibre-optic infrastructure contract
10.3 Acquisitions
10.3.1 Nextgen acquires Silk Telecom
10.4 Company analysis
10.4.1 Nextgen rises from the ashes
10.5 Network information
10.5.1 Overview
10.5.2 Network update
10.6 Products and services
10.6.1 Introduction
10.6.2 Virtual Private LAN Service (VPLS)
10.6.3 Point-to-Point (SDH) services
10.6.4 Point-to-Point (Ethernet) services
10.6.5 Internet Connect services
10.6.6 Co-Lo services
10.6.7 Customised data solutions
10.6.8 Interoperability Testing Centre
10.7 Company history
11. TPG Soul
11.1 Company information
11.2 TPG - Pipe Merger - analysis
11.2.1 Pipe Networks forced the submarine market open
11.2.2 Competition works
11.2.3 TPG is changing the business model
11.2.4 TPG increasing market share ahead of the NBN
11.2.5 Wholesale operation
11.3 Company structure
11.4 Company divisional overview
11.4.1 Parent company - Washington H Soul Pattinson & Co (WHSP)
11.4.2 Soul Pattinson Telecommunications (SOUL)
11.5 Network
11.5.1 Overview
11.6 Operating results
11.6.1 Subscriber statistics
11.7 Financial results
11.7.1 2009
11.7.2 2008
11.8 Products and services
11.8.1 Residential services
11.8.2 Business and wholesale services
11.9 Company history
12. TransACT Communications Pty Limited
12.1 Company information
12.2 Network
12.2.1 Overview
12.2.2 Suburban FttH network projects in Canberra
12.2.3 Service providers
12.3 Company analyses
12.3.1 Possible buyout by NBN Co
12.3.2 TransACT acquires Neighbourhood Cable (NCPL) - 2008
12.3.3 TransACT’s FttH network rollout
12.3.4 Neighbourhood Cable
12.3.5 Upgrade to IPTV
12.4 Products and services
12.5 Company history
13. Vodafone Hutchison Australia
13.1 Vodafone and Hutchison merge australian operations
13.1.1 Competition concerns
13.1.2 High level facts and figures
13.1.3 Vodafone - Hutchison merger is good news for competition
13.1.4 Positive and Negative elements
13.1.5 Outlook
13.2 The merging companies
13.2.1 Vodafone
13.2.2 Hutchison
13.3 Operating statistics
13.3.1 Vodafone
13.3.2 Hutchison
13.4 Financial results
13.4.1 Vodafone
13.4.2 Hutchison
13.5 Mobile access networks
13.5.1 Vodafone
13.5.2 3G and HSPA network
13.5.3 Hutchison
14. Glossary of Abbreviations
List of Tables and Charts
Table 1 - Selected 2nd tier telco - revenue by service - 2004 - 2010
Table 2 - Total 2nd tier telco - revenue by service - annual change - 2004 - 2010
Table 3 - 2nd tier telco - revenue by provider - 2003 - 2010
Table 4 - 2nd tier telco - revenue by major provider - annual change - 2003 - 2010
Table 5 - 2nd tier telco - revenue by major provider - relative market shares - 2003 - 2010
Table 6 - AAPT - operating expenses and revenues by service - 2006 - 2009
Table 7 - AAPT Consumer - Internet and broadband subscribers - 2005 - 2008
Table 8 - AAPT - calling minutes - national - 2007 - 2008
Table 9 - Amcom - operating revenue - 2000 - 2009
Table 10 - Amcom - financial breakdown - 2004 - 2009
Table 11 - gotalk - revenue and annual change - 2003 - 2009
Table 12 - iiNet - total revenue and annual change - 1997 - 2010
Table 13 - iiNet - active subscribers - 1997 - 2009
Table 14 - iiNet - subscribers - 2007 - 2009
Table 15 - Internode - DSL statistical overview - 2008 - 2009
Table 16 - Macquarie - services revenue - 1999 - 2010
Table 17 - Macquarie - annual revenue by division - 2004 - 2010
Table 18 - Macquarie - annual revenue growth by division - 2005 - 2010
Table 19 - Macquarie - revenue contribution by division - 2004 - 2010
Table 20 - M2 - revenue, EBIT and net profit - 2004 - 2009
Table 21 - Soul - broadband subscribers - 2003 - 2009
Table 22 - TPG - broadband subscribers - 2007 - 2009
Table 23 - TPG Soul - mobile subscribers - 2008 - 2009
Table 24 - TPG Soul - revenue overview - 2001 - 2010
Table 25 - TPG Soul - EBITDA and NPAT - 2006 - 2010
Table 26 - TransACT - total subscribers and annual change - 2002 - 2009
Table 27 - Vodafone - direct and MVNO mobile subscribers - 2006 - 2009
Table 28 - Vodafone - 3G subscribers - 2007 - 2009
Table 29 - Vodafone - total voice minutes - 2005 - 2009
Table 30 - Hutchison - subscribers and annual change - 1999 - 2008
Table 31 - Hutchison - customers by division - 2003 - 2008
Table 32 - Vodafone versus Hutchison revenue - 1997 - 2009
Table 33 - Vodafone - monthly pre/postpaid/blended ARPU - 2004 - 2009
Table 34 - Hutchison - key financial results - 2004 - 2008
Table 35 - Hutchison - ARPU per month - 2006 - 2008
Exhibit 1 - AAPT at a glance
Exhibit 2 - AAPT interconnect agreements with international carriers
Exhibit 3 - AAPT international network
Exhibit 4 - Amcom at a glance
Exhibit 5 - Amcom products and services
Exhibit 6 - gotalk Ltd at a glance
Exhibit 7 - gotalk group of companies
Exhibit 8 - gotalk company activities and milestones - 2000 - 2009
Exhibit 9 - gotalk mobile prepaid and postpaid services
Exhibit 10 - iiNet Ltd at a glance
Exhibit 11 - iiNet DSLAM enabled exchanges - 2009
Exhibit 12 - Internode at a glance
Exhibit 13 - Internode products and services
Exhibit 14 - Macquarie Telecom at a glance
Exhibit 15 - Macquarie Telecom data network PoPs
Exhibit 16 - M2 at a glance
Exhibit 17 - M2 services by brand - 2009
Exhibit 18 - Nextgen Networks Pty Ltd at a glance
Exhibit 19 - Nextgen’s VPLS network
Exhibit 20 - Nextgen network distances and construction dates
Exhibit 21 - TPG Soul at a glance
Exhibit 22 - TPG Soul entities within the Group
Exhibit 23 - TransACT Communications Pty Ltd at a glance
Exhibit 24 - TransACT network FttC Coverage
Exhibit 25 - Broadband ISPs over TransACT network
Exhibit 26 - Vodafone Australia at a glance

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