11/10/2010 11:44:00 AM
New Vodafone growth strategy, as Q3 results show gains
Vodafone this week launched a growth strategy centred around data, enterprise, convergence, emerging markets, M2M and financial services.
The group will focus on Europe, Africa and India in a strategy update looking to create ‘a more valuable Vodafone’ after launching its initial efficiency strategy in November 2008.
Ovum analyst Emeka Obiodu said: ‘Going forward, Vodafone now needs to find new growth opportunities. Its current M&A strategy is no longer hunter-centric. In fact, recently Vodafone is more likely to be selling than buying in the market. The stake in China Mobile has gone, the financial assets in Softbank Japan (remnants of a 2006 disposal) are going and even the Verizon Wireless and SFR stakes are not safe.
‘As such, growth will need to come from a leaner, more efficient organisation. That was our assessment of Vittorio Colao’s intentions when he became CEO and he looks to be following through on it.
The new strategic agenda, especially with the emphasis on data services, M2M, tiered data pricing, enterprise services and wholesale data (as seen in the Netherlands) are all designed to squeeze out more value from Vodafone’s existing assets.’
The operator, which reported its results for the first half ended 30 September, added 122,000 UK customers during the third quarter of this year, taking its total base to 18.98 million.
UK revenue grew to £2.6bn from £2.5bn a year earlier due to contract base growth, better churn management, improved ARPU and expanded indirect distribution channels. EBITA was £599m, compared with £583m in the same period in 2009.Total churn was 38.5%, of which 59% was prepay and 16% contract.
Data revenue growth remained strong, with increasing penetration of smartphones and mobile internet bundles offsetting ‘continued intense competition’ and weaker prepaid revenue.
Overall, group revenue grew 4% to £22bn as the operator increased its full year guidance for adjusted operating profit from £11.8bn to £12.2bn. Group profit for the first half ended 30 September was up 3% to £6bn.
Obiodu added: ‘Vodafone can take credit for getting its European base back to growth. Three months ago, Ovum warned that the management’s immediate focus should be to sort out its European base before growth inevitably tails off in emerging markets.They are on track to achieve this. Already Germany, the Netherlands and the UK have all returned to growth, helping to offset their continued struggle in Spain, Italy and Greece.
‘But Europe still remains a challenge for Vodafone. The region accounts for 63% of revenues and 69% of EBITDA, making it critical to Vodafone’s overall success. And that is why the £2bn cost reduction plan, heavily tilted to Europe, is of paramount importance to the group.’