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Optus’ Origin, Sumo deals show comms services taking on role of utilities

A key trend of telecoms and energy companies converging could well be a sign for telecoms that communications services are fast becoming a utility,  according to data and analytics company. GlobalData.

Optus Wholesale recently entered into agreements with two retail energy service providers—Origin Energy and Sumo Power—in Australia.

“This is not the first time energy and telecoms have met in the Australian marketplace,” said GlobalData, referring to MVNO Amaysim launching retail energy services in 2017 after purchasing online retailer ClickEnergy for A$120 million.

According to GlobalData Research, demand for energy services in Australia is expected to grow at an average rate of 1.6% over 2018 to 2020, faster than that for mobile communications (1.4%) or fixed communications services (1.3%).

“Meanwhile churn in the energy space is incredibly high with retail energy providers constantly changing pricing schemes to lure new customers,” the firm added.

“The shift for telecoms companies into the energy market comes as competition is driving down communications services prices and margins,” said GlobalData telecom technology and software analyst Malcolm Rogers. “Several telecoms providers have seen margins on core businesses like fixed-line voice and basic broadband decline as consumers increasingly see communications services as a basic utility like electricity or water.”

Rogers said utilities by their nature fetch lower margins as customers see them as easily interchangeable substitutes, fueling the process of commoditization. “Commoditization of telecoms services has been a topic of concern in the industry for a while, with many telecoms companies investing in other industries like software or entertainment to try and diversify their revenue.”

Optus is competing with Telstra and TPG for market share on Australia’s government owned national wholesale broadband network (NBN). Optus and Telstra are looking into ways to secure as many customers as possible ahead of the TPG and Vodafone Hutchison Australia merger.

As part of the deals, Origin Energy and Sumo Power will sell Optus NBN home broadband, voice and Optus mobile fixed broadband in a bundle with residential energy services. Both companies hope to add postpaid mobile services from Optus to their bundling options in the near future.

“The deals seem to benefit the energy companies and Optus, as increasing competition from disruptive players is a challenge for both industries,” said Rogers. “If all goes well for Optus, making deals with energy providers to resell Optus NBN broadband will help to increase its NBN market share.”

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