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Optus cuts handset subsidies, ups iPhone and Galaxy price

Optus cuts handset subsidies and pushes up the price of mobiles, arguing similar moves from Telstra and Vodafone allow it to remain competitive.

Optus has confirmed its move to reduce handset subsidies, pushing up the price that consumers pay for mobile devices from the telco. However, the company has argued that the action follows similar moves from Telstra and Vodafone which allow it to remain competitive in the retail space.

(Credit: Apple)

Optus confirmed the actions following the release of Goldman Sachs research that said the telco had increased the price of Apple iPhones and Samsung Galaxy smartphones to pursue a strategy of growth.

"Optus has cut handset subsidies across its post-paid mobile plans [and] raised handset pricing in the past week," Raymond Tong, a Goldman Sachs research analyst, told Fairfax Media.

"While Optus has stated its desire to stabilise/increase its market share, these moves are consistent with its goal of driving profitable growth. Optus handset subsidy cuts follow similar moves by Vodafone [Hutchison Australia] in February-March.

"[Telstra] may see this as an opportunity to raise handset pricing through its own subsidy cuts," he said. "[Optus' price increase] is another sign mobile industry pricing and competition remains rational [and that the] focus remains on driving profitability."

However, CNET Australia understands that Optus followed the lead of Telstra and Vodafone in cutting handset subsidies, allowing it to increase profit margins while still remaining competitive in the retail marketplace.

"This [the cut to hanset subsidies] is consistent with Optus' strategy put in place 18 month ago to remain competitive in the market and transform our business for profitable growth. As part to this strategy we've reviewed our cost base, including reducing handset subsidies."

Optus admitted that the move had pushed up handset prices, but that the company "continually reviews its handset repayment plans to remain competitive in the market place".

CNET Australia contacted Telstra and Vodafone Hutchison Australia for a response to Optus' moves. Vodafone declined to comment.