The addition of 4.14 million new subscribers in the fiscal first quarter ended June was mostly the result a combination of aggressive marketing and attractive price plans. Vodafone now commands a total worldwide customer base of 165 million, up 12.3% from a year ago, thanks to the growing markets of Spain, Italy and Romania.
In March, Vodafone paid $3.5bn in cash for the Romanian mobile phone group Mobifon SA, and rapidly growing Czech wireless operator Oskar Mobil AS. These two acquisitions gave the mobile giant an additional 6 million customers. Vodafone also signed up 1.1 million new 3G users in the quarter, taking total registered 3G users to 3.3 million.
There were mixed fortunes in Vodafone’s traditional western European markets. Germany and Spain led customer additions in the quarter. In Germany it added 497,000 customers, taking its total customer base to 27.7 million, a rise of 8.8% year-on-year. Average revenue per user fell however from 299 euros ($360) to 295 euros ($355).
Spain saw 368,000 new customers in the quarter, an 18.9% year-on-year rise, which gave it a total customer base in Spain of 11.8 million customers. ARPU increased to 421 euros ($507) from 414 euros ($499) in the previous quarter.
In Italy, Vodafone attracted 204,000 users, beating the estimated figure of 192,000. It now has a customer base of 17.5 million there, and annual ARPU increased slightly to 360 euros ($434).
In the UK meanwhile, Newbury, UK-based Vodafone signed up 165,000 subscribers, almost double the 86,000 expected by analysts, giving it a total UK customer base of 15.5 million users. ARPU dipped to GBP 300 ($362) from GBP 306 ($369) for the year to March, mainly because of regulatory price cuts in termination rates.
But it is Japan that is causing Vodafone’s management the most headaches. Vodafone has long had a problem here, despite it being a growth market. Its Japanese unit is currently the third-ranked mobile operator in the country, and despite having a client base of 15 million customers, it has been losing ground to rivals including KDDI Corp and NTT DoCoMo Inc, mainly because it allowed them to gain an early lead in 3G.
To turn things around, Vodafone’s CEO Arun Sarin shook up Vodafone Japan’s structure and management. In February he appointed the Vodafone UK boss Bill Morrow to head up the unit as its president. Vodafone also spent JPY 475bn ($4.3bn) last year to buy the rest of the unit.
Yet on a year-by-year basis, Vodafone lost 72,000 customers in the quarter ended June. Sarin pledged to reverse the losses, and a profit decline, during the next fiscal year. However, he also hinted that he would be prepared to offload the unit if it doesn’t come right. Sarin told reporters that while Vodafone plans to be in Japan in the long term, the operator would view the Tokyo-based business with an open mind. Previously, he had said Vodafone would be selling services in Japan for decades to come.
The best thing we have to do today is to fix the company, he said. If we fix the company in the timeframe outlined, whatever we do in the future, we’ll have many more options. We’re not married to any asset.
Vodafone has made clear that it plans to expand into under-developed markets in order to counter the high saturation rates of mobile phones in most of its core markets. Sarin told reporters on a call that he wants to buy more of Poland’s Polkomtel SA, in which Vodafone owns 20%, and that any bid would probably be with equal shareholder TDC A/S, the Danish incumbent carrier. He declined to comment on media reports that Vodafone and TDC offered PLN 8.7bn ($2.55bn) to take control of the Polish company.
Sarin also said he may bid for Turkey’s second-largest wireless operator Telsim Mobil Telekomunikasyon Hizmetleri AS. The Turkish regulator has said it will sell Telsim to help recover $6bn that Turkey spent to cover losses at an Uzan-controlled bank that failed.
Vodafone also reiterated its forecast for the year ending March 2006 that revenue from mobile services, including units it doesn’t control, will increase between 6% and 9%.
