news The Australian newspaper has reported (click here for the full article) that embattled mobile telco Vodafone Australia has been put up for sale, with a memorandum on the issue having been issued to potential buyers such as telcos and investment houses in Asia and Europe.
The telco has been struggling for some time in the Australian market, courtesy of a series of network outages and faults in the latter months of 2010 and early 2011 which resulted in customers deserting it wholesale.
In August 2011 it revealed that its total customer base declined by 375,000 over the past six months (although that included some re-classification of customers), and in February this year the company revealed it had lost a further 200,000 customers in the second half of 2011. To resolve the issues, Vodafone has embarked on an extensive upgrade of its network infrastructure, and this month formally kicked off a customer ‘guarantee’ program which is seeing it promise customers reliable service on its network — or the customers can exit their contract gratis.
Vodafone Australia’s two major shareholders are the Hutchison Whampoa group based in Hong Kong, and the master Vodafone company, which is based in the UK. The Austraian company was formed from the merger of previously separate mobile telcos Hutchison (Three) and Vodafone Australia several years ago.
Asked by Delimiter about The Australian’s report today, a spokesperson for Vodafone Australia forwarded a statement by the global Vodafone Group. It states: “Vodafone remains fully committed to our operations in Australia and our sole focus is on the turnaround of the business.”
In addition, they highlighted a statement by Canning Fok, managing director of Hutchison Whampoa, at the February results announcement for Vodafone Australia.
At the time, Fok said: “VHA’s accelerated investment in the network and new service initiatives are our highest priority. Together with our partners at Vodafone, we have provided and will continue to provide extensive financial support for VHA in order to accelerate the work needed to ensure all of our customers in Australia enjoy state-of-the-art mobile network services. We are confident that the continued network investment will see VHA deliver stronger results in 2012.”
I would not be surprised at all to learn that options are being investigated for the future of Vodafone Australia. Why? From an investor perspective, although the company has been performing poorly in a financial sense for some time, there would appear to be strong opportunities in the company going forward.
Vodafone Australia is almost the definition of a company which a major private equity firm or infrastructure company in another country would be interested in. The company has incredibly strong brand recognition in Australia, it has a huge number of existing customers, and it’s operating in a market in which there are literally only three players. It’s almost guaranteed that the company will continue to enjoy a major share of that market merely by existing.
In addition, given that Vodafone’s network is being massively upgraded and that opportunities abound for the company to expand into the fixed broadband market as the National Broadband Network is rolled out, as well as take a bigger slice of the mobile pie from the higher priced Telstra and Optus, I would say the company is likely to have a solid future under the right management. Right now the public is probably under-valuing it, but I think those who look at the world through a financial lens might think differently.
This sounds pretty counter-intuitive, given Vodafone’s ongoing network headaches and the fact that so many customers no longer consider it an option for their mobile phone service.
However, you have to consider how fast things can turn around in this area. Just a few years ago, Telstra was one of the most hated corporations in Australia, under the rein of then-CEO Sol Trujillo. A few years later, with many of its customer service problems fixed and a new customer-centric strategy in place (coupled with and driven by a genially smiling CEO in the form of David Thodey), Telstra’s on top of the world and heading higher. There’s no reason to suggest that Vodafone isn’t capable of getting its act together in similar fashion, and I’m sure that a few international telcos and private equity groups have already run the numbers over the company over the past few years.
Of course, it’s hard to know how seriously to take The Australian’s article on the subject in the first place. With very few sources quoted in the newspaper’s article this morning, no quotations from the claimed investment document itself (it seems clear The Australian has not directly seen it) and a quote that almost amounts to a flat denial from Vodafone, one does have to wonder what’s really going on behind the scenes. Only time will tell.