Telstra’s growing wireless customer base raises NBN questions

The viability of Telstra’s negotiations with the National Broadband Network Company have been questioned after the telco announced its core fixed lines and calls businesses have continued to record declines.

It comes as the company also announced its number of wireless subscribers is on the increase.

Telstra announced it has over 1.3 million subscribers using wireless broadband products, with revenue in that area totalling about $368 million for the six months ending December 31. Around 30,000 customers also left the company’s fixed-line services in the same period.

“This has been driven by continued customer growth with SIOs up 279k in the half to 1.325 million and 73.2% from the prior corresponding period, driven by consumer demand for prepaid wireless broadband which was only launched in September 2008,” the company said in a statement.

The company also said revenue from fixed-line services has fallen by about $222 million. The company’s overall revenue also fell by 6.9% to $2.99 billion.

The leap to wireless has brought the company’s negotiations with the NBN Co. into question. It is currently discussing with the Government-owned company how it could move its traffic onto the NBN, which will deliver speeds of up to 100 megabytes per second.

However, the loss of fixed-line customers has caused some industry analysts to question whether the NBN will be worth the effort – and $43 billion price tag.

Wireless services are becoming more popular as users access the internet more on sophisticated smartphones, such as the new iPhone and BlackBerry models.

It is also important to identify what Telstra classifies as “wireless”, as it is referring to the use of mobile broadband and voice services, rather than just fixed-line internet services which still remain popular.

However, the National Broadband Network will incorporate both voice and internet services.

Telstra chief executive David Thodey has said 10% of the company’s homes now operate without a fixed line. Rival telcos have attempted to take advantage of this trend, with Perth-based iiNet even offering competitive pricing for Naked DSL plans – internet which does not require phone line rental.

But David Kennedy, research director at analyst firm Ovum, says there will be enough demand for fixed-line services to justify the NBN.

“Keep in mind when we talk about wireless, we’re often talking about voice. Mobile voice is often a very good substitute for fixed voice, but not necessarily so for broadband. Particularly this is the case when the NBN is a triple-play that will provide voice, internet and television services.”

“While there will be a certain proportion of households with mobile only, the services the NBN will offer can’t be made to the same extent on a mobile broadband network.”

Kennedy says he views fixed line and mobile services as being complementary rather than direct competitors. “There will always be areas of direct competition, but for anyone with high bandwidth in the home, mobile will be a complementary service.”

Meanwhile, Thodey said in a statement the company will continue to offer new products in order to build up its user base. He also stated negotiations with the NBN Co. will continue as planned.

“A key part of our strategy is to offer new products and services. We will continue to invest in a string of new products like Telstra T-Box” and Telstra T-Hub” that differentiate us in the market. These new products, along with ongoing upgrades to our Next G” network, will help us regain momentum through fiscal 2011.”

“We remain engaged in constructive talks with the Government and NBN Co. We remain committed to try to find a mutually acceptable outcome, but the path ahead remains immensely complex.”