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.”
opinion/analysis
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.
Anything is for sale at the right price…
I’ll have to check my bank balance.
Hey Stephen, there’s no need to check your bank balance. Vodafone might pay you to take it off their hands.
The brand recognition is still very strong, when the network is stabilized price competition and value offered will drive customers to product. The Vodafone network is also a wholesale provider to the likes of gotalk, red bull mobile and several others, I wonder how their sales are going.
Stupid article from the Australian. Who was their ‘inside source’? whenever I read ‘insider source’ I read ‘we’re making copy up to fill an empty paragraph in the financial page cos it’s a slow news day.’
Then silly websites run with it with lame commentary tacked on that is pure drivel.
how big would you have to be to inhale voda?
i dont think its limited to international prospectives. if it were me i might investigate if iiNet could play…. i know Internode has resold Optus for some time now and were looking at resale of Telstra, or some form of change from the existing optus product. Voda was looking to get into fixed line; but iinode already can sort that. in fact the reverse ends up happening, they can take voda customers and offer them fixed line while offering iinode customers a relatively new built mobile network.
that sort of acquisition would take a LOT of work for iinet to digest. but it would make iinet an operator on the same level as Optus and Telstra, with self owned and operated fixed and mobile units.
that said im unsure as to the extent of MMs interest in actually getting involved in mobile telephony, or even the more root issue of the truth of the Australians reportage – which could turn out complete bunkum and invalidate any speculation in any case.
still, its fun speculation, and its what came to my mind first thing.
PLEASE GOD NO…..iiNet should never purchase a company that fails as hard as Vodafone.
The only network to use in Aus (as much as it pains me to say it) is the Next G network. Anything else is pretty fail!
1) Telstra (Next G)
2) Optus
3)
4) Voda/3
Wouldn’t it be funny if Hutchinson buys out Vodafone and rebrands the whole network as 3?
I can’t see that happening ;)
Wouldn’t it be better called ‘4’ ?
I doubt Mr Malone is in the business of burning money, which is what I see with Vodafone business.
Maybe Google will by them? They (Google) are rumoured to be interested in the spectrum auction coming this year.
I would very highly doubt that.
People in Australia expect their mobiles phones to be used in most major centres without failures. The fact is Vodafone couldn’t deliver on this. It’s concentration on being “cheap” and also being a wholesaler made for less cash to expand and grow its network.
It’s high time a lot of consumers come to realise it costs real money to build and service a network for most Australians. There are no fairies that come in the night and provide and install the infrastructure for free.
The fact that there was 2g, 3G and now 4G only shows that there will be a continual need for investment in upgrading a network if it is to satisfy the demand of customer requirements.
The lesson from this is sometimes you can price things too cheaply and the revenue only becomes a cash flow for day to day activities and leaves nothing left for investment for tomorrows technology.
Vodafone if you are going to be fair dinkum, get rid of your wholesaling, build a network that can be used as your customers demand and don’t be a cheapskate carrier to satisfy those remaining customers who believe in being cheap is good. Oh if this report is correct, you have seen the light and no longer prepared to offer what customers really want, a good reliable service at an appropriate cost. Not a cheapskate network at a cheap price.
I’m a shareholder myself – I havent heard anything today… but we’re generally the last to know ><
I see this going a few ways:
1. Vodafone sells, hutchison stays in – brand remains the same. Since Hutchison already run the company, it'd be a no-brainer. They'd continue the streamlined restructuring and network build. Hutchison are incredibly good business people, but can be extremely cut-throat – good for investors, not for consumers.
2. Vodafone and Optus start a roaming agreement between themselves in order to compete with telstra once the network is upgraded to 3G HSPA+. This will benefit Optus more, given that Vodafone's existing LTE spectrum has more than enough available space for both companies AND Vodafone's infrastructure is already over half-way to being LTE / HSPA+ Capable, thus saving alot of time and money.
3. Vodafone continues as normal, shrugs off whoever made this call and changes its ways.
4. Vodafone sells to someone like TPG or iiNode, who then overtake Optus as the dominant market player. This then forces Telstra to pick up their game.
5. Vodafone sells. The ACCC blocks the sale, because the market would then only really have two key players – forcing prices back up and value down to pre-2001 levels. The duopoly would then need to be heavily regulated so that Optus and Telstra arent extorting the customer base.
Vodafone's new connections rate is flagging in the dealer space. Dealers are losing interest, because VHA isnt paying the commissions that they used to. The problem with this, is as customers storm over to Optus and Telstra, the networks now are struggling so badly with the new customers, consumers have no choice but to complain at government. This then has a detrimental effect on both networks, leading to failures on a large scale. Optus is already over capacity in large areas, as is Telstra. Vodafone as a missing player would cause large scale reprocussions while one of the two (or a new third player) attempted to get their house in order.
What people dont realise, is that without vodafone here – you'd never get prices and value as good as they have been. The only reason Telstra's prices are good is because they were cashed up and ready to kick Vodafone while they were down. Without Vodafone in play, prices would go back up – lowering value.
Vodafone may have its issues recently, but they've been a necessary evil.
Vodafone is still sending me texts saying that I have a bill for -$1.87 waiting to be ‘paid’. rofl.
send them an invoice for it.
@ nonny-noose
No chance iiNet could afford them, (iiNet has a market cap of around 450m) voda is currently spending 1b to upgrade their network.
The spectrum license they own, would be worth iiNet =D
And to be honest, sick of iiNet buying out companies, due to the fact they are unable organic growth.
Yeah, it’s impossible for iiNet to acquire them based on current finances etc.
hmmm if the second/third largest isp cant afford Voda then thats pretty much it for them i think, if there is any truth to the sale rumour at all. i agree with the merger difficulties in terms of market powers, there arent many ways you could go through with such a thing with ACCC blessing. hence my query about how big iinet would have to be, as that would probably be one of the easier propositions to get past them.
im not sure about some of the other possibilities, i see from the responses how unlikely my initial thought was now and some of those alternatives id say myself are equally as unlikely. just have to watch and see i guess….if nothing else, an interesting rumour :)
Let me get this straight all this “data” about vodafone being for sale is based on a News Ltd source ?
This news compnay is the same “source” that almost on a daily basis for years has printed technica ly inaccurate and misleading information regarding the NBN.
The same company that has done everything they can to try to get the general public to believe the liberal parties village idiot (Tony Abbott) falsehoods regarding wireless being a viable alternative to the NBN.
Even if this article was true, based on News Ltd’s skewed biased reporting on telecommunications issues I certainly wouldnt believe them.
+1
I wouldn’t value Vf higher than a $29/mth plan.
Hahaha yeah just in time for the grand prix in melbourne where vodafone sponsor two major race teams… One in V8’s and the other in F1 …both of who do very well. Gotta love the media: doing anything to fill a gap in a column.
As an existing customer of Vodafail is wist to make some comments, mobile phones on the Central coast
an absolute failure, drop out 3 calls out of 5 and has happened 3 to 4 time in one call.
I then made the mistake of purchasing a mobile prepaid internet card , what a joke, if I took the computer into Gosford city center it worked fine but 3 kilometers out total failure, and the cost is bloody joke, we put our money into their hands first and save the costs of accounts and they charge you more, possible they should be jointly owned by the big four banks and I could then understand the rediculaus cost.
No I think they should be allowed to go bankrupt as they dont deserve anything else as for the trade name I would hide it.
Sounds like a slow news day to me. Not a lot of evidence.
Michael Wyres correctly pointed out that anything is for sale at the right price. But who would buy it?
I can’t see it going to another telco. Vodafone and Hutchison are both major players, and have been in Australia for over 15 years and won’t just sell their entire presence in the country to a competitor.
And I’m not convinced anybody other than a telco would want to buy it. It could get bought out by a generic investment firm and run independently, but that’s risky and comes with high costs for bringing in new expertise that VHA currently (with its parent companies) may not need to deal with.
Ultimately VHA may not be in the best position, but this has actually been the case for both companies almost ever since they got into the market. They value the mere existence of the brand in Australia, otherwise both 3 and Voda would have bailed out long ago.
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