Vodafone hit by heavy competition and prepay decline

Vodafone hit by heavy competition and prepay decline

Vodafone UK lost almost 325,000 customers during its most recent trading quarter, as the operator was hit by intense competition from rivals such as O2.

The operator posted its full year results this morning, with Vodafone Group under pressure to sell its lucractive stake in Verizon Wireless, which could net it as much as $120bn. The group continues to be hit by the ailing southern European market, with it writing off £7.7bn during its latest financial year.

In the UK, service revenue was down 6.6% to £1.19bn with the operator hit by cuts to mobile termination rates, competition and a fall in out of bundle usage. Even if the effects of mobile termination rate changes were struck out, sales would have fallen 3.5%.

Vodafone reports profits across the half year rather than quarterly and while its performance for the second half of the 2013 financial year improved from £589m to £620m sequentially, earnings before interest, debt and amortisation fell 6.2% on 2012.

Like rivals, the operator is keen to move customers onto more lucractive contracts and it added 75,000 customers to postpay during the quarter. This was down on the 93,000 customers it added in Q4 2012. However, there was an exodus from prepay, with the operator losing 398,000 customers during the quarter. This resulted in customer numbers shrinking by 323,000 to 19.2m.

While Vodafone is trying to swell its contract base, it is also doing so at a cost. Average revenue per user was £19.90 during the quarter, down from £20.30 in Q3. Contract ARPU also dropped 2.18% to £31.30 during the quarter. This is a shallower decline compared to its rivals with O2 seeing its contract ARPU drop 11.5% and EE's fall 7.4% during their most recent trading quarters.

Churn fell at the operator from 35.5% to 34.7% with contract churn falling from 7.3% quarter on quarter, thanks to the operator's new Red proposition, which had one million customers at the end of March. Across its entire customer base, 55.7% have a smartphone, a leap of more than 25% on a year ago. More than 85% of its contract customers are opting for a smartphone.

Across its full year, adjusted operating profit fell 27.7% to £294m and service revenue dropped 4.0% to £4.81bn. For Vodafone Group, service revenue fell 1.9% on a like for like basis to £40.94bn, with an 11.6% organic decline in southern Europe. Adjusted operating profit was up 9.3% on a like for like basis to £12.0bn.

Vittorio Colao, group CEO, said: 'We have faced headwinds from a combination of continued tough economic conditions, particularly in Southern Europe, and an adverse European regulatory environment. I remain very excited about our longer term prospects, as customer appetite for high speed data grows rapidly, and companies look to embed mobility into their corporate strategies. The launch of Vodafone Red has been very successful, providing a solid underpinning for future revenue as customers take advantage of the best of the Vodafone experience.'

Author: Graeme Neill

Written by Mobile Today
Mobile Today


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