Wireline Telecommunications Concentration Indices (1997-2009)

Wireline Telecommunications Concentration Indices (1997-2009)

When Australia embarked on liberalisation of its telecommunications the wireless sector was still in its infancy but growing rapidly. Consequently Telstra’s incumbent position was much more vulnerable than for the wireline sector. Both Optus and Vodafone moved quickly to establish their own wireless networks and began to compete strongly with Telstra and establish themselves in the market. Following full liberalisation of the sector a fourth wireless carrier (Hutchison) established its own network and several other independent service providers relying on the established networks to carry their services also entered the market.

The largest of the independent service providers, OneTel, began operating in 1999. Its major stockholders included James Packer of PBL Media (major interests in broadcast TV, magazines and subscription TV) and Lachlan Murdoch (son of Rupert and previously associated with News Corp in Australia). It quickly established itself in the market with an aggressive marketing strategy, but then failed spectacularly when it got itself into credit difficulties and its major stockholders withdrew from further support of the enterprise.

Starting from its incumbent position, Telstra gradually lost market share as the other major carriers established themselves. Its loss of market share was nominally greatest in the early years of market liberalisation and introduction of full competition. However, the loss of market share did not translate into reductions of market revenue. With market growth, its wireless revenue continued to grow in absolute terms, but at a slower rate than its competitors. Telstra remains the largest operator in the market with the market share in recent years tending to stabilise at around 43 per cent.

The smallest of the major carriers, Hutchison, entered the market in 2000 with its 3G network. It gradually increased its market share, but remained relatively small compared to the three previously established wireless carriers. In early 2009, it entered into a 50:50 joint venture with Vodafone combine the wireless operations of the two carriers in Australia. In effect, the move reduced the main players in the industry from four to three competing carriers.

The changes in industry concentration during the period under observation are reflected in the HHI index. As there number of significant players in the industry reached five only for a small part of the period under review, the C4 index does not change significantly. Details are provided in Table 10 and Figure 9.

Source: Australian Communication and Media Authority ‘Carriers Eligible Revenue Returns Data’, Australian Competition and Consumer Commission (various published reports); Companies' annual reports; Productivity Commission (2001), and authors' estimates