news The rate of customer losses being suffered by Vodafone Australia has accelerated again over the three months to the end of September this year, with the company reporting overnight that it lost some 584,000 Australian customers that quarter. However, the troubled company’s situation is a little more complex than it looks from the outside.
The most accurate high-level picture of the overall customer loss trend experienced by Vodafone Australia this year can be found in the quarterly results which the company’s global head office has been releasing in the UK every three months. Doubling these figures gives a total picture of the company’s Australian customer roster, as Vodafone Australia is actually a joint venture between Vodafone Group globally and Hutchison in Australia.
At the end of March, extrapolating from Vodafone Group’s global figures, Vodafone Australia had a total customer base of just over 6 million. At the end of June, that base had shrunk to 5.6 million. And by the end of September, it had shrunk yet again, reaching just over 5 million. The numbers indicate a trend — that Vodafone Australia’s customer losses have increased over the period of this year.
However, the situation is a little more complex than this. At the end of June, the Australian operation of Hutchison, which owns 50 percent of Vodafone Australia, reported that Vodafone Australia had just over 6 million customers at that point, the same total as Vodafone Group globally had reported at the end of March.
The reason the two joint venture partners are reporting different numbers for these periods is that Vodafone Group globally does not report Vodafone Australia wholesale customers who are accessing the company’s network through other brands. This means that while the overall trend within the Vodafone Australia numbers can best be seen through the ongoing Vodafone Group global numbers, a more realistic picture of where the company was at at the end of June can be seen from the Hutchison figures at the end of June.
The situation also gets a little more complex when you look at Vodafone’s recent loss of some 584,000 customers in the three months to the end of September (under the Vodafone Group numbers).
It is believed that a substantial number of the customers lost in that quarter were low value customers originally belonging to either the Crazy John’s or ‘3’ brands which Vodafone has recently consolidated into its master brand. And at the same time, over that period, Vodafone has started adding new, higher value customers to its network again, as the company’s ongoing network and customer service improvements have started to kick in.
The result of this multifaceted activity could be characterised as lesser value or ‘dead wood’ customers being lost from the company, while it starts to retain more of its higher value customers and add new high value customers into its health body.
The reality of this situation was reflected in Vodafone Group’s global financial results. The company commented: “Our joint venture in Australia experienced a service revenue decline of 8.1%, which was lower than the 14.8% service revenue decline for the six months ended 30 September 2012. Network performance has improved significantly in recent months, including the launch of a high speed 4G network, however the business continues to be impacted by weak brand perception.”
However, its customer losses still put Vodafone Australia in a significantly less competitive situation compared with its rivals Telstra and Optus, which have in excess of 15 million and 9 million customers respectively.
The news comes just weeks after Vodafone Australia chief executive Bill Morrow claimed that the telco’s 3G mobile network was as fast as that of Telstra and significantly faster than that of Optus, in yet another sign of the company’s confidence that its technical capabilities are catching up with that of its competitors.
Morrow’s comments were only the latest set of claims Vodafone has made regarding the speed of its mobile infrastructure. In a statement released in mid-July, Vodafone noted that Internet metrics firm Ookla had conducted speed tests by thousands of Samsung and HTC smartphone users in the first week of July and had found that its 4G speeds were the best in Australia, courtesy of the specific advantages of the wireless spectrum it owns.
Separately, the company’s many improvements to its customer service capabilities are also having an impact on its operations. Tasmanian Premier Lara Giddings congratulated the company last week on Vodafone’s progress in doubling the workforce in its Tasmanian call centre to some 1,500 employees.
How’s Vodafone doing? It’s complex, folks. A lot of the low profit margin customers have left the company’s network and continue to leave, meaning that its overall profitability ratings are going up (well, it’s still losing money hand over fist, but you know what I mean). At the same time, Vodafone is getting a lot better at retaining its high value customers and is even attracting new high value customers.
From what I can see, Vodafone CEO Bill Morrow is rapidly transitioning the company from a completely unsustainable model into a very much sustainable one. However, at the same time, Vodafone only has around 5 million customers left. It’s still losing customers constantly, and all evidence shows that rate is increasing. I have confidence that the company’s current trend will slow down and even reverse over 2014 to 2015. Telstra is certainly overweight with customers right now, and I bet Vodafone could siphon a lot of those customers back as its momentum grows.
But this is just an opinion, and I’ve been wrong before. The publicly available evidence still shows Vodafone is going rapidly downhill. Let’s hope Morrow’s predictions for Vodafone’s turnaround are on the money. For the sake of competition in Australia’s mobile sector.