There’s a scary story for mobile phone
users – and a warning for the ACCC – in
this morning’s Australian where Michael Sainsbury says Optus’s next acquisition
target is Vodafone’s network.

The story is written from the business
angle – taking out Vodafone’s troublesome capped call discounting would be good
for Optus’s business – and ignores the consumer’s viewpoint. Well, it is on
the business pages.

The consumer should see it as another move
towards a mature telco industry here, ie the sort of oligopoly big business is
normally happy to settle for when profit margins are especially rich, where
competition based on price becomes limited.

The Oz puts the profit margin on mobile
calls around 40% but I’d say it’s more like 50% for Telstra –
very tasty indeed. The only serious dent
put in those margins has come from the push for capped call plans. Writes
Sainsbury:

Mobiles remain
at the heart of Optus business, accounting for more than 70% of the
company’s earnings and profits. But recent price cutting by Vodafone as well as
Hutchison has hit Optus hard.

O’Sullivan sees
a deal with Vodafone as a way of staunching the rapid erosion of margins in the
$11-billion-a-year sector and also creating a mobile powerhouse to match
Telstra in scale, locking in better margins for Optus.

The capped calls plan price war allegedly
eats up to a quarter of the fat mobile margins – although that figure should be
tempered by the increased usage that goes with the cheaper rates.

Vodafone has had little joy in Australia
so the suggested move to a virtual network running on Optus has logical appeal.
In the international scale of things, we’re hardly worth the candle.

Elsewhere in the telco space, no-one wants
to pay the Kiwis anywhere near their asking price for AAPT, as the AFR‘s Street
Talk column reports, leaving that business as a weak minor player. With Virgin
gone and Vodafone’s ambitions potentially greatly reduced, we’d be settling
down to Telstra, Optus and Hutchison (which also hasn’t made any financial sense
out of its big investment here).

Hutchison being an annoying number three in
the game sparking price wars it can’t win doesn’t add up in the long run. So
what’s the future? An effective duopoly or something just a little larger with
lots of hardware sharing?

If consumers are going to miss out on real
price competition, maybe a bolshie Trujillo with a new
network offering product competition would be better than nothing.