8/5/2009 11:00:00 AM
Orange and Vodafone see revenues tumble in Q2
The Big Three operators emerged from one of the toughest financial quarters ?in recent years, with O2 the only operator to see growth in its revenue.
The figures for April to June revealed both Vodafone and Orange were hit with a 4% drop on revenues compared with the same period the previous year, at £1.2bn for Vodafone, and £1.1bn for Orange. It has led to cost-cutting at both operators to protect declining margins.
The pressure comes from a severe reduction in the money that networks are bringing in through voice calls, as a result of intense competition and consumers demanding cheaper voice bundles.
Vodafone’s revenue from voice calls fell 11.7% to £726m compared with one year ago.
There are fears the declines will continue into the second half of the year amid regulatory changes that will reduce the amount of money the operators make through roaming and termination fees.
O2 suffered slower growth than it has enjoyed over the last 18 months mainly due to the general downturn in consumer spending.
Nevertheless, O2 continues to be the network with the highest revenue, the strongest profits, best margins and biggest base of contract customers.
Vodafone appeared to be clearing up its prepay base, shedding 297,000 customers in the quarter, but leading an aggressive push for more valuable prepay customers with new promotions. Prepay is seen as the first part of Vodafone’s attempt to challenge the market leader, O2. (See page 8).
Vodafone’s profits have been steadily falling from £346m for the first quarter of 2008 to £295m in the first three months of this year, and now £262m.
Vodafone has been aggressively chasing contract customers, including through its return to Carphone Warehouse with high commissions and compelling offers.
Vodafone added 138,000 contract customers in the three months, while Orange signed up 64,000 contract customers in the same period. Meanwhile, O2 added 312,673 contract customers.
O2 has the largest profit margin of around 25%, while Vodafone has an estimated 22% margin and Orange has 20%.