The Australian Financial Review

Broadband's Coming of Age

"Mr Wilson also said broadband growth this year - new subscribers in the first week of March have already eclipsed February's numbers - would ensure Primus met its target of 10 to 15 per cent earnings growth during this calendar year."

By Katrina Nicholas
Friday, March 7, 2003; Page 65

Primus Australia's formative but aggressive push into the broadband and bundling markets is paying dividends with strong growth in the first two months and a major company restructure prompting an upbeat Greg Wilson to put a 2003 float back on the agenda.

"To me, broadband is where most of the growth will be in 2003," Primus' managing director said in Sydney yesterday to outline the broad restructure to staff. "Before it was too expensive but now, the price point is right, the content is there and consumers are accepting that broadband is here to stay."

Primus, a total service provider wholly owned by Primus Telecommunications in the US - offering local, domestic and international telephony, data and internet and is a mobile service reseller of Telstra's CDMA network - has experienced a broadband growth rate of 20 per cent this year. Subscriber numbers have grown from 5000 to around 7500 at the end of February, with the bulk of those residential customers.

Mr Wilson said television advertisements, teamed with agreements with companies like Southern Star Endemol which offer Primus customers access to exclusive content, had helped fuel the growth.

The man at the helm of what two years ago was an insignificant loss-making telco, also predicts broadband's coming of age in 2003 will take the gloss off Australia's fledgling but growing pay TV market.

"I think that broadband will take over the demand for pay TV in Australia," he said. "Optus and Telstra are bundling it but it's still expensive and you're limited in what you can watch, unlike with broadband where users have access to the whole web."

Primus' focus on selling broadband to residential customers has been one of the triggers behind the company's decision to restructure, creating two new divisions - business and consumer.

The changes mirror those made by Telstra at the end of last year and reflect the telcos' shift in focus from products to the customers.

Mr Wilson said the changes would see Primus beef up staff numbers by around 20, bringing employees to more than 850 around Australia. Costs, however, are expected to remain steady this year at $100 million, as is capital expenditure at around $25 million.

It has also expanded the focus of several of its key executives and is placing a much greater emphasis on selling more than one service to customers. Of its 750,000 customers, which make Primus Australia's fourth largest fixed line provider, 9 per cent are on bundled packages but the option is being taken up by half of new subscribers.

Mr Wilson also said broadband growth this year - new subscribers in the first week of March have already eclipsed February's numbers - would ensure Primus met its target of 10 to 15 per cent earnings growth during this calendar year.

Last month, Primus reported a net profit of $25.3 million for the 12 months to December 31 and earnings before interest, tax, depreciation and amortisation of $73.9 million.

Its US parent reported a $US34.6 million ($56 million) loss but promised it would be profitable by the end of the year. Primus Australia expects to remit around $65 million to the US this year.

Although Mr Wilson expects the telecommunications market in Australia to remain tough and extremely competitive over the next 12 months, he said the possibility of a float sometime before December was likely.

"We want to list because that will put us in the same awareness bracket as our competitors and we're talking to investment banks ... we always are," he said. "Obviously with the uncertainty that's around at the moment you'd have to be an idiot to float. But as soon as we're happy with the valuations and the state of the global markets, it's something we'll do." With Primus generating cash - it has around $25 million at its disposal - growing by acquisition is something Mr Wilson also intends to continue to do.

Last year Primus bought six smaller ISPs and harbours hopes to buy OzEmail when it comes on the market.

"No one can survive as a one-product company anymore," he said. "I've always said we'd be interested in OzEmail...we're interested in any acquisition so long as it adds value and generates cash."

For more information on Primus, view the latest press releases.