JupiterResearch: Vodafone results

Thomas Husson posts at Jupiter Analyst Weblogs about Vodafones results. He noted that "there was no major announcements at Vodafone's analyst meeting today. Many were expecting either significant layoffs to reduce costs or a major investment in a fixed operator to offer convergent services."

Husson states it was simply a strategy update in line with the 3 new major business units and provides the following comments:jlraxcmb

1) Western European controlled business: cost reduction and revenue stimulation in a maturing market.

Most cost reduction are expected within the One Vodafone programme. There is obviously a scale and scope effect enabling to benefit from economies of scale when you have 170M customers worlwide. By the way, contrary to what is often said, Vodafone is not the largest mobile company in the world. China Mobile is far ahead. Just imagine the power of China when trying to establish its own norms and standards...

Price pressure on voice calls from new competitors (MVNOs, alternative operators,...) and from incumbent ones, cuts on termination rates and on roamimg tariffs, regulatory pressure are a reality.

• Vodafone has then two options to increase revenues:increase voice revenues by stimulating usage (migrating prepay to contract, fixed-mobile substitution,...)
• increase data revenues: non-voice represented on average 17% of revenues at the end of March 06 and up to 20% in Germany and in the UK. Excluding messaging revenues, the share of new content revenues is increasing steadily but still limited to a maximum of 24% of non-voice revenues.

2) Vodafone's other business and emerging market portfolio: delivering strong growth.

No doubt the growth will come from fast growing emerging economies were mobile penetration remains low. Sounds like it is more likely to come from Eastern Europe and Asia, given South America is abandonned to Telefonica. The stake in some affiliates (Verizon, SFR,...) will need to be clarified in the coming months but the statement was clear "Vodafone envisages a lower level of merger and acquisition activity in the future".

3) New Businesses: delivering converging services.

Vodafone had been quite successful with its Vodafone Zuhause offering (448K registered customers at the end of March 06) in Germany. According to Mark Mulligan, VP of Jupiter Research, who just come back from Italy, Vodafone Casa (another homezone tariff) is currently heavily promoted in Italy. If it is not necessary to acquire a company in the IP world (their "infrastructure light" approach), Vodafone will need to announce major partnerships with ISP or alternative fixed operators to be able to reach its target: "Vodafone anticipates that its Mobile Plus Strategy will account for approximately 10% of Group revenues in three to four years". This sounds ambitious when an integrated telco such as France Telecom only announced 5 to 10% of its revenues to derive from convergent services by 2008...