Macquarie Group Limited (ASX: MQG), offers banking, financial advisory, investment and funds management services, life insurance, securities brokerage, corporate debt financing, real estate development financing, and foreign exchange services to clients globally.
Recently, the financial services giant announced its plans to enter the highly competitive telecommunications market with the launch of its new mobile business called Nu Mobile, which is designed to offer mobile phone plans bundled with used handsets. The business concept is inexpensive for customers relative to buying new smartphones on a plan and is popular in the United States with a great scope of proliferation in Australia.
As per the business model, Nu Mobile will resell access to Telstra’s mobile network and not develop/own its mobile infrastructure per say. Hence, it can be considered as one of the mobile virtual network operators (MVNO), which includes the likes of industry players such as Amaysim, TPG, Vocus and Kogan, in a $ 750-million annual market. However, Nu Mobile will only commercialise mobile plans bundled with used smartphones unlike the other MVNO peers that promote the SIM-only model.
Since Macquarie already leases over a million smartphones to customers via mobile retailers, the company owns a huge number of used smartphones. Moreover, according to the Australian Securities and Investment Commission, the Nu Mobile business’ ultimate holding company would be Macquarie Group with its Directors and secretaries as current Macquarie employees.
Nu Mobile’s website has been launched with a portal to sign up for customers, but no other further information released. The product will be available in the coming months to the wider MVNO market, which accounts for around 16 per cent of the mobile market, according to research house IBISWorld.
Telstra, Optus and Vodafone dominate the mobile retail segment with Telstra alone accounting for around 42.9 per cent of the market share. As per the inferences of IBISWorld reports, while the global mobile industry generates revenue of $ 24 billion and profits of $ 2.7 billion, the MVNO market segment, contributes only around $ 749.8 million to revenues and $ 84 million to profits.
Moreover, Amaysim is one of the biggest MVNO market player (one-third share), followed by Medion, TPG and Vocus. The advent of another competitor like Macquarie Group, with a point of difference, is expected to present a major threat to the existing telco players and further dynamize the sector.
Moreover, there is also a rising trend amongst customers to hang onto the current handsets instead of upgrading continuously. This is also anticipated to add to the demand for Nu Mobile services.
For the first half of the financial year ended September 30th, 201 8, (1H19), the Group reported AUD 5.83 billion operating income with net profit contribution of AUD 762 million, down 36% on 1H18 and up 54% on 2H18. Macquarie Group also declared interim dividend of AUD 2.15 per share with its current annual dividend yield at 3.98%.
To date, Macquarie Group’s market valuation stands at $ 45.78 billion with ~ 340.38 million outstanding shares. On April 24th, 2019, the MQG stock closed the market trading at AUD 135.770, up 0.94% with 1.62 million shares traded.
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