UPDATED: Vodafone upbeat on turnaround despite more customer losses

Vodafone has blamed “stiff competition” and a saturated market for the loss of 137,000 more customers in the six-month period ended 30 June.

But Australian analysts have pointed instead to what they described as a failing turnaround strategy and a scarred brand.

Vodafone ended the half with 5.2 million mobile customers, a 13.6 percent decline from the year before, according to financial results released today by Hutchison Telecommunications Australia Limited (HTAL), which owns half of Vodafone Hutchison Australia.

Hutchison reported a $79.5 million loss for the half year. It was somewhat less (17 per cent) than the $95.8 million loss reported in the same period last year.

“The decline in customer numbers was predominately in the prepaid and wholesale (MVNO) customer base due to seasonal trends and stiff competition from a wide range of alternative providers,” Hutchison said.

Hutchison also blamed the more than 130 per cent mobile penetration in Australia. “The relatively inert customer base was another hurdle to acquiring new customers,” it said.

In one piece of good news, Vodafone said its postpaid customer base has “stabilised with steady growth in high value customers, who use more data particularly as they shift to 4G and go to higher price plans.”

With the Vodafone turnaround plan now entering its third year, Hutchison remained bullish on the future.

“HTAL is pleased with the progress of VHA’s turnaround plan to date and expects to see the benefits from the strategic initiatives continue to flow into improving financial results from the second half onwards and into the 2015 financial year,” it said.

“HTAL remains confident VHA is on track to achieving its turnaround goals and HTAL is committed to its investment in VHA and will continue to support its growth and profitability in the future.”

Vodafone said it added an average of 100 new 4G sites per month in the first half of 2014, and expects to quicken the pace to 300 sites per month later in the year.

In June, the Vodafone 3G and 4G networks reached 96 per cent of the Australian population.

Vodafone “is seeing the benefits of the introduction in 2013 of its 4G (LTE) network with some of the fastest speeds in Australia, the upgrade of its 3G network, the expansion of onshore call centres against industry trends and the introduction of innovative international roaming pricing,” Hutchison said.

Vodafone is upgrading its IT systems in contact centres and retail stores with the goal of improving acquisition and upgrade processes and better meeting customer needs, Hutchison said.

Vodafone has reduced operating expenses by reducing its number of stores and an initiative to make processes more efficient, it said.

“In the second half of 2014 and into 2015, VHA will continue to improve the commercial capabilities of the business, with further improvements to service, online retail capabilities and points of sale to match its commercial presence to its expanded network coverage,” it said.

Telecom analyst Paul Budde said he found Hutchison results “shocking and very worrying.” They confirm that things are not as rosy at Vodafone as former CEO Bill Morrow had indicated in public comments, the analyst said.

“Vodafone will have more radically change their strategy,” he said. “A ‘me-too’ approach following Telstra and Optus is not going to solve their problem.”

Even if Vodafone can stop its decline under its current strategy, Budde said he doubts the telco will turn it around into growth.

Budde stressed that he doesn’t want to see Vodafone exit the market. “For Australia it is critical that we have a strong and healthy competitor it would be rather disastrous if we drop back to a duopoly.”

Another telecom analyst, Chris Coughlan, said he was not surprised at Vodafone’s continuing struggles.

“I made the prediction that it would take VHA at least five years to recover from the brand damage caused by the network issues they had in 2010. It would seem that this is ringing true regardless of the upbeat forecasts by current and previous leadership.”

“The issues were significant enough that a fair amount of time needs to pass before the market will consider moving back.”

Adam Bender covers telco and enterprise tech issues for Computerworld and is the author of dystopian sci-fi novels We, The Watched and Divided We Fall. Follow him on Twitter: @WatchAdam

Follow Computerworld Australia on Twitter: @ComputerworldAU, or take part in the Computerworld conversation on LinkedIn: Computerworld Australia

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