Trends in Australia’s Mobile Wholesale Market

Australia has experienced major disruptions over the last four years: a pandemic, followed by a burst of price inflation and a surge in interest rates. It is no secret that this has put financial pressure on businesses and households. 

One effect of this pressure is that customers are reviewing their utility spending. MVNOs and alternative broadband providers will be beneficiaries of this. 

MVNO Market Dynamics

Venture Insights has worked with Optus to forecast the MVNO market for the next four years. We foresee accelerated uptake of MVNO services. This trend can be attributed to rising financial pressures on households. The market dynamics favour a mix of established MVNO players and non-traditional entrants who can leverage strong brands. In the latter case, marketing and sales costs can be minimised by leveraging existing brand or retail networks. 

The recently announced regional network sharing deal between Optus and TPG Telecom is good news for the MVNO industry. The deal will allow Optus to roll out its regional 5G network faster, giving MVNOs more options for coverage in regional Australia. TPG Telecom’s MVNOs will also benefit from expanded coverage using the Optus network.

The continued inflation and possibly higher interest rates in 2024 are likely to drive growth for MVNOs. As a result, Venture Insights believes the MVNO market in Australia is robust, with MVNO connections projected to grow at an annual rate of 8.6% through to FY27. Revenue growth is expected to outpace connection growth, rising at an estimated 11.5% annual rate through to FY27, due to increasing ARPUs driven by a combination of price increases and migrations to plans with larger data allowances. 

MVNO ARPUs will include some price increases, but it is important to put these increases into perspective. They come after a long period of price deflation in telecommunications. ABS data shows that the price index for telecommunications equipment and services has declined 24 points since 2012, while general prices have risen 37 points. This reflects the much higher value being delivered by the industry, as access to calling and data has expanded enormously. Telecommunications has been a very good deal for customers over the last decade, with the telecommunications price index only stabilising in 2021, and rising slowly after 2022.

Figure 1: Telecoms Deflation vs Consumer Inflation (Jun 2012 to Mar 24)

Source: ABS, Consumer Price Index: Group, Sub-group and Expenditure Class, Index Numbers by Capital City 640107.

The Fixed Wireless Access Market

Presently, NBN makes up 88% of consumer broadband subscriptions (excluding voice-only and enterprise services). The balance consists of a mix of alternative fibre, satellite, and fixed wireless access (FWA) services, and these are giving the NBN Co growing competition in the consumer market.

We estimate that over 600,000 non-NBN FWA services, from both MNO and non-MNO providers, are currently in the market. Another readily available option is to leverage Optus 5G for FWA, which it offers as a wholesale product, to customers as an alternative to other fixed broadband providers.

According to the Australian Competition & Consumer Commission, FWA connections grew 36% in FY23, so we believe there is a growth opportunity in this market.

Assuming continued aggressive promotion by MNOs and current FWA pricing trends, we expect that fixed wireless access will reach 10% of households by FY28. NBN is combating this with its fibre-to-the-home (FTTH) upgrade offer, a proposed speed boost for its high-speed plans, and improvements to its regional fixed wireless network.

NBN Fixed Resale Market

The resale of NBN broadband by larger broadband operators to smaller ones promotes competition. It is an important on-ramp for small broadband providers in both consumer and business broadband markets, who lack the scale to buy direct from NBN.

We are seeing steady growth in NBN resale connections. We now estimate that just under three-quarters of a million NBN broadband connections are now resold to small operators, which will grow at 3.2% per annum from now until FY28. We expect total NBN connections to be flat over the next few years, so resold NBN connections will take a progressively larger share of total NBN connections, a sign of growing competition.

Early growth in this market is focussed on the household market. More recently, enterprise-focused telcos and some managed service providers (MSPs) have been using resold NBN access to support business customers. 

Figure 2: Total NBN resale connections (000)

Source: Company reports, Venture Insights analysis

The rise of resold NBN is consistent with growth we are seeing amongst challenger brands. The largest consumer NBN provider, Telstra, recently dropped below 40% consumer market share for NBN services. In contrast, we are seeing growth amongst challenger telcos, and higher NBN resale shows that small providers are also growing. This is the reverse of the trend up to the middle of the last decade, which saw consolidation in the retail broadband market, especially into TPG. The fixed broadband market is becoming more competitive and fragmented.

To conclude, we are seeing growth and rising competition in both mobile and fixed services. Both existing challenges and new entrants can expect to capture a growing share of the market over the coming years.

The growth and deep sophistication of the wholesale market is an important enabler of this rising competition. Both existing challengers and new entrants seeking growth are leveraging the wholesale market to build scale and competitiveness. This will be good for households and businesses who will benefit from competitive markets and more choice for their telecommunications service providers.

Ready to explore how mobile services can enhance your business? Whether you’re looking to expand your portfolio or become an Optus Wholesale MVNO, we’re here to help you unlock new opportunities. Speak with us today about adding mobile services to your offering and staying ahead in an increasingly competitive market. Let’s discuss how we can help power your growth and strengthen your brand with the right solutions.