Vodafone signs up 637,000 Brits to 4G, but still making losses
Despite customers paying more for fast data, only selling its stake in Verizon stopped the European network from seeing multibillion losses in the past year.
Vodafone has signed up more than 637,000 people to 4G in the UK, and those 4G phone fans are using twice as much data as 3G customers. But only selling off its stake in US network Verizon could stop the European mobile network from making multi-billion losses over the past year.
Rival UK network EE has more than 2 million 4G customers after a year-long headstart over johnny-come-latelys Vodafone and O2. The latecomers are starting to catch up in terms of coverage, which is a major factor in recruiting en masse, and Vodafone says its 4G is live in 106 cities, towns and districts as well as "a number of locations" with a population of under 10,000.
EE has a 4G service live in 200 cities and towns, with Rhyl in North Wales recently becoming the 200th.
Vodafone revealed the numbers in its results for the past year, running until the end of March. The network's overall revenues are falling, with the best thing Vodafone can say being that this latest 3.6 percent decline in revenue is the smallest fall for 18 months.
Vodafone did technically make a profit, but only if you count the cash injection from selling off a 45 percent stake in US carrier Verizon Wireless. Not counting that windfall, Vodafone made a loss of £5.3 billion. That loss is expected to increase to as much as £11.9 billion next year thanks to increased investment in the network, including wider development of 4G.
"Unfortunately, the uptake of data fails to deliver in financial terms," says Dario Talmesio, principal analyst at Ovum. "There is a certain paradox here: Vodafone is putting most of its commercial and investment efforts in something that is not turning revenues."
Diversifying may help, but mobile is still at the core of the business. "Vodafone is moving to the right direction in adding fixed line and media assets," says Talmesio, "but ultimately it needs to restore or protect mobile retail pricing."
Vodafone says it's been hit hard by that global economic climate we hear so much about, as well as changes and charges from industry watchdogs in Europe, such as cuts in Mobile Termination Rates (MTRs), the fees charged when you call a friend on another network. Things have been tough in the Czech Republic, Portugal, Spain and Romania, and chief executive Vittorio Colao also admitted to "mishandling of the network" in Germany.
Positive trend
There is some good news. "In a positive trend in the UK," notes analyst Kester Mann of CCS Insight, "contract net additions more than doubled to 157,000 year-on-year. This contrasts to O2 and EE, which both reported a year-on-year decline. However, the number of 4G customers at 637,000 trails both EE and O2."
Emerging markets showed a ray of light, Mann says. "Strong performance in India again helped offset some of Vodafone's weakness in Europe. Service revenue improved 13 percent here, driven by a 125 percent increase in data usage and good net additions."
Increased investment will also improve things in future, but, Mann warns, "the challenges of strong competition, the economy and regulation will continue to drag performance".