Vodafone has revealed in documents to Competition and Markets Authority (CMA) that it does not generate enough cash in the UK to sufficiently invest in the market, relying on group funds to do so.
A source close to Vodafone explained to Mobile that there were a number of reasons why the group had to support the UK wing financially: ‘There are major overheads in the UK market as well as incredible price competition. Margins for all the networks are extremely thin, and there’s a huge number of costs. You only have to look at spectrum – most operators are still paying bank interest on the billions spent on 3G.
‘The cost of infrastructure both in developing the network and in supporting it with backhaul costs is significant. Rental and planning costs are higher than any other market in Europe. Handset subsidies in the UK are some of the highest around and there are other taxes that don’t exist in other places across Europe.
‘There are some big decisions to be made, and it’s essential that access to infrastructure is part of that. Any network sharing arrangements need to be balanced. BT is our biggest supplier and there is the potential for it to also become our biggest competitor. There need to be reforms in the UK’s planning rules.’
Kester Mann, senior analyst-operators at CCS Insight, also believes the competitive landscape in the UK operator landscape is unique, with many companies considering their position within it as a result: ‘There is no doubt that the UK is one of the most competitive markets in Europe. It’s one of the reasons why Telefonica is looking to withdraw. It’s a tough market and it’s well known that margins are low. At this moment the UK is at an advanced stage in terms of data services, 4G and the high proliferation of smartphones, but that could all change.
‘There is so much transition in the UK market at the moment and we don’t know how that will pan out in the long run. I would be surprised if there wasn’t more activity in the market. It’s not theoretically impossible that Vodafone could exit the UK altogether. It has a broad portfolio of UK assets and it has a long way to go with quad play. It would be a tough one for Vodafone as a UK company, but it’s not out of the question.’