news Ailing mobile telco Vodafone Australia late yesterday revealed it had lost 443,000 customers and about $817 million in the 2012 calendar year, as indications continue to mount that the company’s network rejuvenation, staff restructuring and executive leadership changes have had little to no impact on its fortunes.
The company’s fifty percent equity owner Hutchison Telecoms revealed the figures in its full-year financial results statements to the Australian Stock Exchange late yesterday. “For the 12 months ended 31 December 2012, VHA’s customer base declined 443,000 to 6.6 million,” the company said. It noted that Hutchison’s share of VHA’s financial losses would be $408.8 million, meaning that the total losses suffered by Vodafone Australia in that period were likely to be double that figure — about $817 million.
The results show Vodafone’s financial woes are accelerating, rather than slowing down. In the previous year, for example, Vodafone’s financial losses were believed to be about $350 million.
In the company’s statement, Hutchison chairman Canning Fok said Vodafone was implementing a turnaround plan with the full support of its shareholders, and had “made meaningful inroads in stabilising customer numbers and financial performance.” He added: “Although continuing losses are anticipated in 2013, [Hutchison] expects improvements in [Vodafone’s] performance through the year and into 2014.”
In its statement, Hutchison said Vodafone had undertaken a variety of initiatives in order to help it through its problems, including significant upgrades to its network that currently offer customers increased download speeds of up to 8Mbps on 60 percent of its network. It claims to boast improved 3G data session and call set-up rates that now reach the benchmark levels set by the international Vodafone Group.
“[Vodafone] has also improved first-call customer care resolution rates by almost one-third in the company’s call centres; and reduced Telecommunications Industry Ombudsman complaints by 37 percent,” Hutchison wrote. “Significant progress has been made to consolidate the business and brands in market. [Vodafone] has closed the 3 network and announced plans to close down the 3 and Crazy John’s brands in 2013.” In addition, the company has restructured its operations and culled a number of staff.
“However, the turnaround these changes are designed to support will take time to flow through to its results,” Hutchison wrote. “The next 12 months are expected to remain challenging.”
Vodafone also has $1.6 billion of borrowings due for repayment in June 2013 — a figure which represents almost half of its total annual revenue at the moment. Hutchison said Vodafone was currently in discussions with its financiers regarding the refinancing of this loan.
“Both of [Vodafone’s] ultimate shareholders, Hutchison Whampoa Limited and Vodafone Group Plc, continue to provide support as needed to enable funding of [Vodafone’s] business plan, including the network investment,” Hutchison wrote. “[Hutchison] is committed to its investment in [Vodafone], and despite the operating challenges facing [Vodafone], continues to support the strategy to return [Vodafone] to growth and profitability in the future.
The news comes as the nation’s largest telco Telstra continues to demonstrate the exact opposite trend to Vodafone in its customer base. For example, Vodafone has not yet launched its 4G network, but Telstra already has 1.5 million customers on its 4G infrastructure, including some 500,000 iPhone 5 customers who bought the handset in the last few months of 2012.
Optus is also heavily investing into its own 4G infrastructure, but has not yet revealed how many customers it has on it. The SingTel subsidiary has in general shown only slow or flat growth in its mobiles division over the past several years.
In July 2012, I wrote the following, under the headline Warning: Telstra is killing off Australia’s mobile competition:
Right now, when it comes to mobile, Telstra holds all the cards in Australia, and it is playing those cards for all it is worth; rapidly soaking up hundreds of thousands of customers, destroying Vodafone’s revenue stream wholesale, and holding Optus back with one hand while it’s raking in cash with the other. It has the best handsets, the best network, the most marketing clout, the best reputation for network quality and a colossal lead in 4G infrastructure.
Now, from a customer viewpoint, there is no doubt this is fantastic — for now. Telstra is bending over to make customers like myself happy, and I’m happy to admit I’m a Telstra mobile customer. There is simply no point for someone like myself (who needs access to the Internet pretty much 24×7, anywhere I am), to sign up with Vodafone or Optus, when I know I’m going to get reduced coverage and speed from the alternative networks for only a slightly cheaper cost. And Telstra has been the only mobile carrier I recommend to anyone who asks for years now.
But long-term, what Telstra is doing right now represents a troubling sign for Australia’s mobile industry. Just as it did in fixed broadband, Telstra is now winding back competition in the mobile telecommunications space. One really has to wonder how long multinationals like SingTel and Vodafone will continue to be committed to piling hundreds of millions of dollars into mobile phone infrastructure in Australia, when it is clear they are only going to see very moderate levels of growth in return — and are even going to have to struggle to keep what customers they have. And who will keep Telstra honest with strong competitive offerings, when the company gets too far ahead for its own good?
In five years’ time, just how much market share will Telstra have in Australia’s mobile phone industry? If it keeps on adding 900,000 new mobile connections every six months and converting its customers to 4G while its rivals do diddly squat, I would have to say the answer will be: Most of it.
What we’re seeing from Vodafone at the moment is further indication that the company is rapidly going out of business — and that decline in its customer numbers and revenues is increasing at a fast clip. Optus, meanwhile, is still going sideways — not growing, but not really shrinking, although it has done a good job of rolling out its 4G infrastructure. The only real growth telco in Australia’s mobile space at the moment is Telstra — and it is growing hugely. Reading Vodafone’s results today, it is really not too far a stretch to see a future in only a few years where Vodafone Australia no longer exists and Optus can only offer a moderate degree of competition to an overwhelmingly powerful Telstra.
Is that a future most Australians want to see? I don’t think so. What can anyone do about it? Right now, I’m not sure.
Image credit: United States Geological Survey, public domain