Customers up, losses down for Vodafone

Vodafone gets closer to profitability

Vodafone CEO Inaki Berroeta. Credit: Vodafone

Vodafone CEO Inaki Berroeta. Credit: Vodafone

Vodafone Hutchison Australia (VHA) has reported a loss of $241.8 million for the 12 months ending 31 December — a 40 per cent improvement on last year’s results for the joint venture between Vodafone and Hutchison Telecommunications Australia, when it reported a loss of $430 million.

FY16 was as a “fantastic year” VHA CEO Iñaki Berroeta told a results briefing. Customer numbers, underlying revenue and EBITDA went up, the CEO said

During the year, mobile subscribers on the telco’s network grew by 2.3 per cent to 5.56 million, with Vodafone adding a net new 125,000 customers during the year.

However, the VHA’s direct customer base grew only 0.5 per cent to 5 million. Vodafone prepaid customers declined 4.5 per cent to 1.65 million, while postpaid customers grew 3.2 per cent to 3.35 million.

EBITDA grew 12.2 per cent year on year to $912.1 million. Excluding a revenue hit from the Australian Competition and Consumer Commission decision on mobile termination rates, revenue grew 5.7 per cent to $3.2 billion and average revenue per user (ARPU) grew 3.6 per cent to $43.77. (Including the impact of MTR, the figures dropped to $3.3 billion and $45.87, respectively.)

Underlying the year’s results were VHA’s heavy investment in its network infrastructure and products such as its $5 roaming offering, Berroeta said.

The telco’s relatively young enterprise business unit also delivered some growth, the CEO said.

Domestic roaming

Berroeta used his briefing to take aim at the current Universal Service Obligation (USO) scheme, under which Telstra receives a subsidy to ensure that all Australians have access to a basic telephone service.

Berroeta’s presentation described what Vodafone says is a “vicious cycle” whereby subsidies like the USO help entrench Telstra’s market dominance.

Australia has a “two-speed” market where there is strong competition between Vodafone, Telstra and Optus in metro areas, but a lack of competition in regional areas, the CEO said.

“The way we see it is that today there is a natural monopoly; that natural monopoly size is huge... The natural monopoly is also the recipient of the majority of the subsidies, which in essence... feeds this monopoly even more,” he said.

The CEO questioned the continued relevance of the USO given the government’s investment in the National Broadband Network. Vodafone is a long-standing critic of the scheme.

“This is a good debate that will ultimately help get a much better market structure where competition will be more fair, but also where we will be able to provide similar quality of service to all Australians,” he said.

Domestic roaming, where telcos could be forced to open up their mobile network infrastructure in some areas, is a viable solution to boosting competition in regional Australia, Berroeta said.

“Domestic roaming is actually being used in many countries; in most countries where there is an infrastructure monopoly in telecommunications,” the CEO said.

Telstra’s CEO, Andy Penn, earlier this month described the idea as “unambiguously bad for regional Australia.”

Berroeta decried what he said was “hysterical debate” around roaming.

Vodafone’s outlook

Vodafone would continue its investment in its network, Berroeta said. “There is a lot of work around preparing ourselves for 5G,” he said. Vodafone has so far staged two 5G demonstrations.

“There is quite a significant investment on transmission but also in terms of core network and other parts of our infrastructure,” the CEO said. In January, the company named Ericsson as prime contractor for a half-decade project to virtualise both the core of its mobile network and the IP network supporting services and applications.

The telco is also gearing up for its foray into fixed-line services. Vodafone in October confirmed it intended to offer services over the National Broadband Network. The NBN is a “fantastic platform”, and fixed line services over the network will complement Vodafone’s mobile services, Berroeta said today.

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Tags VodafoneVodafone Hutchison Australia (VHA)Telecommunications

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