Price war: Telstra customers may soon benefit as the company looks to protect its market share. Photo: Andrew Quilty
Telstra will offer its mobile customers lower prices or extra data allowances as the company fights back against Optus, an analyst says.
Optus recently launched a series of mobile plan changes that gave users the ability to share download data allowances across multiple devices.
But it also greatly increased the amount of data users can download and make phone calls free on plans costing more than $60 per month.
Credit Suisse research analyst Fraser McLeish told clients the move was a "significant structural shift in mobile broadband pricing" and that Telstra would most likely sacrifice revenue growth to react.
This would be good news for Telstra's 15.8 million mobile service customers and bad news for its shareholders.
"The change in handset plan prices on their own would not have represented a significant issue for Telstra," he said. "However, the ability to share data across devices for almost no additional cost does add significant value to the Optus offering.
"We therefore expect Telstra is likely to react to protect share."
As a result, Credit Suisse has downgraded its rating of Telstra from an Outperform to Neutral with a lower target price of $5.61 per share on the Australian Securities Exchange.
This is still above Telstra's current share price of $5.32.
The bank also cut its forecast of Telstra financial year 2015 revenues by $231 million based on the looming fight with Optus.
"We trim our Telstra FY15 mobile revenue growth to 2.1 per cent (vs 3.8 per cent previously) to reflect our expectation that Telstra will have to adjust pricing to reflect Optus' new plans," Mr McLeish said. "The bulk of the reduction is to our Mobile Broadband forecasts, which account for circa 15 per cent of Telstra mobile service revenue.
"We continue to like the longer term fundamentals of mobile due to rapid growth in data usage, but near-term mobile revenue risk has increased."
Both Telstra and Optus have talked up the possibility of fighting toe-to-toe on a range of issues over the past month.
Optus networks managing director Vic McClelland told Fairfax Media his company would catch up to Telstra's mobile network by 2016.
It plans to double the amount it spends on advertising over the next 12 months to saturate the market with mentions of Optus and has signalled a willingness to sacrifice short term revenues to grow its flagging customer base.
Optus has lost 160,000 subscribers over the past 12 months as Telstra greatly increases its market share. This is despite Vodafone Hutchison Australia losing over a million customers over the past year.
But Telstra retail group executive Gordon Ballantyne has said he "is not concerned in the slightest" by Optus' moves and that the telco giant will respond to any genuine threat from its rivals.