Telstra unlimited mobile data move a mixed blessing: analysts

Unlimited mobile data plans loom as the next battleground in the mobile market, but could put pressure on Telstra, says UBS.

Telstra and Vodafone have made a pre-emptive strike on unlimited mobile data plans. Pic: AAP

Unlimited mobile data plans are shaping up as the next battleground in the mobile market and Telstra’s move to enter the fray could be a mixed blessing for the incumbent telco, according to UBS analysts.

Telstra yesterday pipped rival Vodafone Hutchinson Australia to the post by launching an “unlimited” mobile plan on the market. However, the offers from both telcos come with caveats.

While consumers won’t have to pay extra for data they will see their speeds slowed down to 1.5 Mbps (megabits per second) once they go over their data caps.

Telstra is launching a $69 per month for 40 GB plan to the market, while Vodafone has countered with three offerings — a $60 plan for 40GB of uncapped speeds, an $80 plan for 70GB and a $100 plan for 120GB of uncapped speeds. Both telcos insist that 1.5 Mbps is enough for consumers to stream video in standard definition, listen to music and browse the web.

UBS analyst Eric Choi said local telcos, particularly Telstra, have finally taken a leaf out of the book of their US counterparts.

“Strategically, Telstra is likely learning from Verizon and AT & T’s mistakes,” he told clients in a note.

“US peers were comparatively late to pull the trigger on unlimited data plans, and as such ceded share to new entrants.”

The new entrant, from an Australian perspective, is TPG Telecom and Mr Choi said that the pre-emptive strike by Telstra and Vodafone may have been designed to blunt TPG’s market share aspirations.

However, it also poses significant short-term challenges for Telstra’s average revenue per user (ARPU) numbers, according to Mr Choi.

“Unlimited plans are likely to put pressure on Telstra’s already shrinking data averages, and promote plan optimisation by customers i.e. ARPU cannibalisation.”

He added that the experience of US telcos with unlimited mobile data plans shows that it can create short-term headaches.

“In the US, the wireless carriers have all moved to offering unlimited data plans (with heavy caveats), with Verizon the last to fall in line in January 2017 (after historically stating it would not move to unlimited plans).”

“The US example, however, has shown that the launch of unlimited plans can be value destructive for the industry, industry postpaid phone ARPU declines accelerated in Q117 and Q217, after Verizon launched its unlimited data plans,” Mr Choi added.

However, he added that Telstra’s $69 price point should limit any immediate hit to its gross margins

“The plan is priced below two of Telstra’s existing 12mth BYO offerings: the ‘L’ plan priced at $79 for 30GB uncapped and the ‘XL’ plan priced at $99 for 60GB uncapped.”

“As such ARPU dilution from migration down from ‘L’ and ‘XL’ plans, could be offset by content cost savings, and potential migration upwards from the ‘S’ / ‘Mx’ / ‘M’ plans,” Mr Choi said.