‘It’s complicated’, but Vodafone losses are still accelerating



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.

Image credit: Matt Wakeman, Creative Commons


  1. Vodafone doesn’t appear to want customers or, at least, retain them. And low value customers can become high value ones.

    Red Bull Mobile (a Vodafone MNVO) apparently lost its contract with Vodafone and stopped allowing customers to recharge from 1/9 this year. It’s believed RBM had about 25,000 customers many of whom were hoping that Vodafone would offer something to retain them on the Vodafone network but it never happened.

    As a Vodafone user for over 16 years (15 or more directly with VF, the last year with RBM), I will move to Boost when my last recharge expires as will three other family members also with RBM. If Vodafone doesn’t want me as customer, I no longer want to be with them.

  2. Vodafone actively discourages existing customers from continuing with them in my experience.

    During my contract renewal (2010) I asked to be given the same deal as a new customer (which was significantly better). Two different sales reps both declined, saying those deals were for new customers only. I asked if they didn’t feel retaining existing customers was important and I was told it was simply Vodafone policy that those deals were reserved for new customers.

    Amazingly I left Vodaphone and haven’t even bothered looking at their deals since. Have been with Optus for ~3 years and they *do* want to keep existing customers. Several months before my contract was due an Optus rep called me and offered me a better plan with a better handset…

    Considering all the other problems Vodafone has had with coverage etc I don’t think they can afford to treat existing customers with such disregard.

  3. Renai , overall a good summary however there are flaws in the argument around the numbers and as a very recent ex-employee I have been close to those numbers. Looking at the public statements 242,000 subs were taken off the customer numbers as inactive with the numbers just announced. Quite a number of those were ex-3 customers who just stopped using the service especially mobile broadband. However the greater losses of 346,000 customers were normal paying customers right across the spectrum of plans – in other words not the bottom end. Vodafone has improved margins by lowering costs primarily because of the influence on the local business of Hutchison. And in regard to Customer Service – no things have not improved and in fact have gone backwards over the past 12 months , TIO complaints have been on the increase in the past 12 months after coming down dramatically in the previous 18 months under different management, and Customer Satisfaction is on the decline and has gone backwards since a year ago while the competitors has improved. Yes more jobs are going into Tassie but again that has been more of a marketing message as most of the calls are still handled out of Mumbai. The customer churn is still horrendous and morale internally is very mixed with plenty of politics being played and with not only customers leaving but staff also. Vodafone can never “recover” from this unless either Optus or Telstra mess up badly and given that Russell and Thodey are at the top of their game that is highly unlikely. The recent doubling of data on certain plans was done in panic as it means if the sales numbers don’t respond to that then Vodafone ends up as a pure value player and neither shareholder is going to let that happen without consequences.

  4. “The result of this multifaceted activity could be characterised as lesser value or ‘dead wood’ customers being lost from the company…”

    Gee a bit harsh on the Crazy John’s and 3 customers there. Bear in mind that Vodafone once happily courted this so-called ‘dead wood’ through a diverse network of resellers. Hell they even absorbed some by acquiring Crazy John’s. Don’t forget that Vodafone is arguably a low-value MVNO in itself when roaming onto the Optus network in regional areas.

    And yet here we are, watching Vodafone as they cast their wholesale customers adrift. I think they are taking a decidedly schizophrenic approach and the customer losses do not suprise me at all.

  5. I must have been one of those “low value” customers that vodafone doesn’t want any more. I was happy to spend $100 for a pre-paid 12 month mobile broadband plan for “emergency” use, but there’s no way I’m going to pay vodafone monthly rates at over double that!

  6. Vodafone have done well to convince everyone that ‘network problems’ were the source of customer dissatisfaction.

    In actual fact, it was Vodafone’s decision to keep aggressively advertising – cramming more and more customers onto a network they knew to be overcrowded – combined with aggressive, anti-customer moves like refusing to cancel contracts for poor performance, blaming all problems on customer handsets, and increasing hold times to 40 minutes to dissuade further complaints – that enraged their customers.

    People don’t forget being treated with utter contempt. Improved network speeds won’t undo that.

  7. To be fair there is a good chance a few of those drop offs during Sept/October would be from people from the old 3 brand. Like me.

    Voda finally closed off the 3 brand during Sept/October and usually that’s when people jump ship.

  8. I’m certainly one of their ‘low value’ customers as I’ve got one of their defunct only pay for what you use accounts. I don’t have a smart phone so I only pay for the calls I make, no rental fee.
    Most months my total cost is about $3.50 as I tend to receive calls but not make many.
    Vodafone coverage is crap but the deal I’ve got is brilliant and I’m loath to move.

  9. Vodafone’s network has not improved, not in Sydney.
    Well let me re-phrase that, Vodafone’s network has not improved in comparison to Telstra’s network.
    Telstra still faster and more depth, in Sydney.
    People I know still complain about poor coverage and dropped calls, today, they’re still leaving Vf for Telstra. Fact.

  10. There was a big sign in South Yarra extolling the virtues of Vodafone’s coverage when I needed to make a call just inside Woolworths. Guess what? No coverage, but the shop assistant helped me out using his Telstra mobile.
    Like I’ve already said, I’ll stay with them because of the plan I’m on but I’m ready to jump ship at a moments notice.

  11. Vodafone will still lose customers in 2014. I have 3 post-paid phones on contract and will finish in 10 months. I will definitely dump Vodafone for it gives me bad 3G service and move to Virgin/Optus instead.

  12. My contract end Jan 13 2014, I’ve told them I’m leaving and joining another network… simple response was OK. Sorry to hear you’re unhappy with Vodafone.

    Not sure how low on the spectrum of their customers I am (2 phones in my name, used frequently), but they didn’t seem to mind.

  13. We stayed with them through the “troubles” (our call quality had not suffered greatly) but will terminate our contracts in 2014. We spend a fair amount of money with them and they will offer incentives to stay, but we are definitely leaving.
    Reasons: New Red plans are rubbish – no 13, 18 or international calls. Yes they have kept the old plans, but insulted us by not offering Australian based support. Moreover, pricing differences vis. other carriers is negligible.( Eg. Telstra will give us discounts as we have other plans with them.) We will either go Optus because they have have taken the principled decision to eliminate bill shock, or else consolidate our plans with Telstra. (Optus would have been a certainty but their network needs improving in our area).
    And no we have never suffered bill shock or ever likely to. But it is time people voted with their feet in order to force Telcos to stop this outrageous behaviour.

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