Tom Devine (consumer sales director) and Nick Birtwistle (head of channel partners)
Vodafone maintains that there is nothing exceptional about its spending on mobile broadband advertising, despite the feeling that you cannot move 20 yards without seeing a billboard promising the ‘fastest broadband in the galaxy’. Every magazine and newspaper seems to feature the advert too.
Consumer sales chief Tom Devine says mobile broadband is undoubtedly the area every operator will be fighting over this year. ‘It is the super stellar market; a whole new revenue stream,’ he says.
Market research group GfK reckons dongle sales have pushed past 100,000 per month, although even this figure could be under given that there are many channels (such as call centres) not on GfK’s radar. 3 estimates there will be one million dongles sold across the market this year.
Devine (pictured) says: ‘We reckon there will be four million laptops sold this year – that gives you some idea of the potential size of the market.’
Also unknown is to what extent dongles will substitute fixed-line broadband, and for how many customers. Devine is gearing up for a prepay proposition to make sure Vodafone doesn’t lose ground to 3. ‘We’re working on pay-as-you-go mobile broadband now.’
Vodafone stated its intent when it dropped its prices at the end of January this year to £15, matching 3, and launched a massive advertising campaign, suggesting it will do all it can to claim the territory for itself.
It appeared to have the paw-prints of CEO Nick Read who previously told Mobile: ‘If anyone thinks that by dropping price they will take share from us, I will respond. I will compete, so they won’t be getting an advantage on pure price.’
The company has been using data speeds to give it an edge in what is becoming a bitterly fought market. ‘For us, speed is clearly the differentiator. People will choose us because they will have confidence in our network,’ says Devine.
3 has already lodged a complaint with the Advertising Standards Authority over Vodafone’s claims over speeds, but Vodafone makes no apologies for its ‘fastest in the galaxy’ shout.
Vodafone claims it currently has 1.8 megabits per second (Mbps) for 80% of the population (HSDPA speeds), and intends to have 50% of the population up to 3.6Mbps by the summer. But the really contentious claim is the 7.2Mbps, which Vodafone makes in its adverts. This speed is currently restricted to certain parts of London and at airports, but Vodafone says this speed will be all over London and in Liverpool, Birmingham, Manchester, Bristol, Glasgow and Reading in the coming months.
Devine brushes aside questions of ‘network capacity’ for Vodafone on the back of its aggressive pricing on mobile broadband, saying that it ‘hasn’t been an issue’ and ‘we’re constantly investing in our network’.
However, with the cheap prices of dongles, the investment in the network and the extensive advertising campaign, the indications are that there will be a squeeze on margins, and market share is clearly the biggest priority for Vodafone.
Retention is the name of the game
In the traditional mobile market, every operator has said retention will be more important than acquiring customers this year.
Devine says: ‘GfK has said the market is slow, but it is in line with our expectations. Everyone is looking a lot closer at retention as there are fewer opportunities for new customers.’
The motivation is that networks don’t incur the heavy costs of acquiring customers when keeping them on the network, but that only stacks up if the customer’s spending stays up too.
The switch to retention is another area likely to see pressure on margins. With the word out to retain customers, high-spending customers threatening to leave their network are being offered a chance to halve their monthly spend in many cases, which consequently pushes down their spending, with the obvious negative impact on the operator’s margins.
Elsewhere, Devine has also stepped up pressure on O2 by launching its Sim-only version last Christmas after seeing the low-cost numbers O2 was putting onto its base.
‘It’s an introduction to contract for a lot of customers; a way for us to start that relationship with customers traditionally on prepay.’
On the surface, the whole premise of a rolling month-by-month, value-based Sim-only model seems to conflict with Vodafone’s broader contract strategy of high value and low churn. But is the attraction simply the low cost of acquiring those customers?
‘If people churn a lot, it won’t be a cheap way [to acquire customers]. O2 started Sim-only in the summer, and we’ve done it since Christmas, so it’s too early to tell for us,’ says Devine.
He suggests launching a Sim-only proposition was as much a defensive move as anything else. ‘If we didn’t have a Sim-only offer, those customers may go to another network.’
Managing the channel
High on Devine’s list of tasks is making the most from Vodafone’s stores. Along with retail chief Terry O’Brien, Devine has set out an NVQ programme for store
staff. ‘We’ve got 1,100 people in the process and 400 people have already completed it.’
Devine adds: ‘Terry and I firmly believe that if there is competition on the high street, the competition really starts for people working in stores.’
No more new stores are likely to be added except for ones within large new shopping centres that will open this year.
As far as the indirect channel is concerned, Devine has promoted Nick Birtwistle into the role of head of indirect since Alistair Firth took a senior role in Vodafone’s Egypt operation.
‘Phones 4u are doing a great job for us,’ says Devine. ‘They are really growing the mobile broadband category, which has been fantastic for us.’
There were questions over Phones 4u’s acquisition of Dial-A-Phone (a retailer Vodafone axed two years ago). ‘The way Phones 4u runs their processes gives us a lot of confidence. We feel more assured about the quality. The market is changing and the offers are clearer.’
Devine comments about the withdrawal from Dextra: ‘The business there was small.’ Dextra had recently lost its account to manage contracts for Tesco to Shebang. Birtwistle adds: ‘Shebang are strong on the technical side; the IT links and so on.’ Asked about other distributors, Devine adds: ‘There are some clever people out there, and we’re always looking at new routes to market.’
Birtwistle will continue in his role of running the prepay business – a critical area of the market for the last year. Competition has intensified, raising vulnerability to box-breaking.
‘We have to be very careful and vigilant. We have some strong deals but we back it up with the right processes.’
‘We can see with some people [rivals] there is a big difference between the GfK numbers and their published numbers, and we’re not going to compete like that.’
‘We know which promotions in which channels will have the greater risk, and we are very careful.’
‘Making markets’: Mark Bond (interim enterprise sales director)