Optus to hike mobile plan prices for first time in two years as telco market heats up

Australia’s second-biggest telco says it has made a “difficult decision” to raise the price of its mobile plans as it faces increased costs and competition.

Optus is raising the price of its mobile plans for the first time in two years, branding it a “difficult decision” as it faces increased costs from upgrading its network to 5G and mounting customer demands for faster internet speeds.

Australia’s second-biggest telco will lift the price of some mobile plans by about 5 per cent on August 5 — the first hike since July, 2022.

In a note sent to customers, Optus said the increase came as it was investing in its network to “boost capacity, speed and reliability of 4G, whilst rolling out our award-winning 5G network to even more Australians”.

“Due to the increasing costs to maintain and provide a great network experience, we’ve made the difficult decision to increase the price of some of our mobile plans. To provide more value, we’ll be increasing the included data on these plans,” the telco said.

Last month, Optus has set a speed record with partner Nokia of one Terabit per second over 1,050km.

“The demonstration showcases the success of the ongoing investment by Optus into enhancing its fibre network, which plays a decisive role in providing connectivity throughout Australia as well as connecting Australia to the rest of the world,” Optus said at the time.

Reliability has been a critical issue for Optus after its national outage late last year which cut off more than 10 million Australians from phone and internet services. Almost 2700 could not contact triple-0 for emergency services, leading to a senate inquiry and ultimately the resignation of former chief executive Kelly Bayer Rosmarin.

The outage also prompted Optus’s owner Singtel to set aside $S54m — which converts to $59.93m at current exchange rates — and accounted for the bulk of Singtel’s “exceptional losses”, which totalled $S94m in its December quarter accounts.

The mobile plan cost increase comes as Telstra chief executive Vicki Brady said last month the telco would abandon its inflation-linked price rises for phone plans.

It has still hiked broadband services by almost 5 per cent — citing increased wholesale costs from NBN Co —, surprising analysts.

The freeze was part of a broader announcement, involving 2800 redundancies, or about 9 per cent of Telstra’s overall workforce, as it strives to achieve $400m in cost cuts as part of its ambitious T25 strategy.

Jeffries analyst Roger Samuel said at the time the scope was limited for further price rises, highlighting increased competition from Optus and TPG’s blockbuster $1.6bn network sharing deal, which is still subject to regulatory approval.

“The main reason is the widening gap between Telstra and Optus, which has not raised prices since July 2022, and is likely to retain prices into the new year due to a leadership change,” Mr Samuel said in a note to investors

“New customer acquisition is getting more difficult given the macro environment and rising competition from low-cost brands, and although Telstra mentioned that subs performance has been consistent with 1H, we think it was because of lower porting in the industry.

“As such, Telstra may need to ramp up marketing spend, especially in the context of a potential MOCN (multi-operator core network) deal between Optus and TPG.”

An Optus spokeswoman said on Wednesday customers would be able to access 5G “at no extra cost, no excess data charges” and “no lock-in contracts”.

“We understand that unexpected events and expenses can make it difficult to keep up with regular payments. Our team is here to help. If any of our customers are experiencing financial hardship, we encourage them to please contact us,” the spokeswoman said.

The telco market has been heating up, with TPG’s budget brand Felix Mobile expanding into major retailers, including Coles, Woolworths and Officeworks, offering a 5G upgrade and to plant a tree on behalf of customers for each month they maintain their plan.

Felix Mobile head Kelly Beater said the 5G upgrade would deliver speeds of up to 150Mbps for its 25GB ($25) and 50GB ($30) monthly plans.

This compares with base NBN plan speeds, which range from 12Mpbs to 25Mpbs and cost about $60-$70 a month.

TPG’s mobile revenue surged 9.3 per cent to $2.2bn last year after it signed on 175,000 extra customers and raised prices.

But, the nation’s third-biggest telco has also hiked prices, lifting the average plan cost of its flagship Vodafone by $4 a month in March.