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News, Telecommunications - Written by Renai LeMay on Thursday, November 15, 2012 9:58 - 17 Comments
Vodafone loses 154k more customers
news Ailing mobile telco Vodafone has revealed it lost a further 154,000 customers in the three months to the end of September, with the continued customer churn piling on more financial woes for the company and signalling that the company’s internal transformation under new chief executive Bill Morrow may not yet be having a positive impact.
In the UK-based Vodafone Group’s financial results briefing session this week, Vodafone revealed that its Australian division had lost 77,000 customers in the three months to the end of September. As Vodafone Australia (VHA) is half-owned by the global Vodafone Group, with Hutchison owning the other half, each stakeholder only reports half of the applicable financial results; meaning Vodafone Australia is believed to actually lost 154,000 customers in total in the period.
Elsewhere in Vodafone Group’s financial results, the company said “the continued weakness is brand perception and [mobile termination rate] cuts” in Australia meant that revenue from mobile services declined by 14.8 percent in the period.
Asked about the issues during an investor briefing, Vodafone Group’s chief executive for emerging markets and Australia, Nick Read, highlighted continued improvements the company has been making to its network and customer service capabilities.
“I think what my boss says on a regular basis is: ‘But is it translated into commercial performance and financial performance?’,” he said. “So just focusing on that; if we take call complaints, they’re down by two thirds from the peak. If we take contract postpaid handset churn, it peaked around sort of mid-30%’s. It’s now mid-20%s and improving. Prepaid active base is now stabilising.
“So the really important data point is service revenue quarter over quarter. Quarter 1 we were down -4.5%, but this quarter we’ve stabilised, so we’re virtually flat, quarter over quarter. So what I’d say is, customers are starting to understand that there is a material improvement in the network. We’ve made good advances in the quality, stabilising revenue, improved customer value management is improving our A&R metrics and of course you heard our restructuring. So my view is, next fiscal year, starting to get back into the double-digit EBITDA margins that we expect.”
“Our job is to turn around the operations, so we’re absolutely focused on that,” Read added. “We’ve got a great management team under Bill Morrow. I was down there July, I was down there September. I’m meeting again in November. I think that shows how much time and attention it’s getting.”
Several weeks ago, Morrow announced a number of major initiatives that he said would help get Vodafone Australia back on track; ranging from making up to 500 staff redundant to appointing number of senior executives and re-focusing internal investment priorities.
The company is also progressing its plans to deliver a new 4G network next year (Telstra and Optus have already launched their 4G networks), and has successfully completed t he first test calls on its 4G infrastructure. It has also committed to delivering a substantial increase in network coverage and is “on track” to complete the remaining upgrades of its network infrastructure.
Morrow said the company’s existing restructuring and network investment efforts were starting to pay dividends, with network improvements meaning Vodafone customers could now receive increased download speeds up to 8Mbps on 60 percent of the carrier’s network, 3G data session and call set-up rates improved to meet international Vodafone benchmarks, dropped calls reduced by one third in metropolitan areas, and first call customer care resolution rates improved by almost one third in Vodafone’s call centres.
“Our customers are telling us they’re starting to see a difference, further demonstrated by a 50 per cent reduction in complaints to the Telecommunications Industry Ombudsman and, notably, a reduction in network-related complaints,” asid Morrow. “We are heading in the right direction, but more needs to be done.”
“The network is beginning to improve, the customer benefits are starting to flow and we’re intensifying our network investment as we position for future growth. Our focus is providing a consistently good experience wherever and whenever our customers touch our brand. We know we are not there yet. Only hard work, further investment and an acute focus will deliver what is needed in this market.”
Morrow concluded: “It is vital that we simplify the business to be efficient and to enable growth in the long term. We need to prioritise every dollar and internal action to count toward an improved customer experience and these changes are designed to deliver just this. We continue to face challenges, but I’m excited about the future. We’re committed to building an agile business that can finally give Australians the service they’ve been demanding from this industry for years.”
However, there are also signs that the company is falling further and further behind rivals Telstra and Optus in the market, and that the company’s turnaround effort is not having as much of an impact on customers as it would like.
The company has been suffering financial difficulties for the past several years, stemming primarily from the late 2010/early 2011 series of network outages popularly known as ‘Vodafail’. Vodafone has been consistently investing in its network infrastructure and customer service capability since that time in an effort to redress the problems, but the company continues to lose customers – shedding 178,000 in the first six months of 2012. The company lost a virtually identical number of customers in the second half of 2011, and about 375,000 in the first half of 2011 (although some of those were losses on paper due to changed methods of accounting for customer numbers).
In September — unlike its rivals — Vodafone confirmed it was declining to sell Apple’s popular iPhone 5 handset to new customers, with the carrier turning away those not already on Vodafone plans, in favour of prioritising getting the hyped Apple device to its existing customer base first.
And although Telstra recently revealed it had sold some 820,000 4G devices on its 4G network in the first 12 months of the network’s operation (including over 100,000 iPhone 5 handsets), Vodafone has yet to launch its own 4G network. Optus has also launched its rival 4G network in most Australian capital cities, but appears to be experiencing a slower rate of customer take-up than Telstra at the moment.
Reading between the lines here, it appears as though Vodafone was hit pretty hard over the past quarter by the launch of the iPhone 5. Vodafone has always had a large amount of iPhone customers; the company’s value-oriented packages over the first few years of the iPhone’s life in Australia saw to that. Given the network and customer service improvements it has made over the past year, you would expect the company’s customer churn to be slowing down. But as the iPhone 5 launched, Vodafone’s network churn actually appeared to accelerate. Consider that Vodafone lost some 178,000 customers in the first half of 2012, but then 154,000 alone in the past three months, while at the same time Telstra signed up some 100,000 iPhone 5 customers. If that isn’t the iPhone effect in action, I don’t know what is.
It will be fascinating to see if this acceleration in the churn is seen in the final quarter of 2012 as well. Vodafone executive Nick Read appears to be suggesting that things look better for Vodafone Australia on a month by month basis instead of a quarter by quarter one. For Vodafone Australia’s sake, let’s hope that he’s right.
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