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Wireless

Vodafone NL: weaker Q3 performance, losing market share

Tuesday 12 February 2013 | 14:02 CET | Background

Vodafone Netherlands said its service revenues (mobile and fixed) fell 3.5 percent year-on-year in its fiscal third quarter to December, to EUR 461 million (GBP 372 million). Excluding the impact of lower termination rates, revenues dropped 3.0 percent, hurt by lower revenues from roaming and out-of-bundle charges. Cheaper subscriptions were also more popular in the period. Vodafone also provided figures on data traffic, which rose 23.4 percent. The number of mobile subscribers reached 5.288 million at the end of 2012, up 0.5 percent year-on-year, with a net loss of 55,000 customers in the quarter. On the fixed market, it added 5,000 lines for a total 31,000.

On the business market, Vodafone reported sales worldwide down 2.5 percent. Vodafone One Net, its fixed-mobile converged service for SMEs, added 33 percent more customers, for a total 2.4 million, helping fixed enterprise revenues grow 10.5 percent. Vodafone also reported 9.7 million M2M connections at the end of the period. The group maintained its outlook for the full year and said it expects the difficult market conditions to continue.
 

Commentary

Vodafone’s interim management statement for the fiscal third quarter only provided limited information on the Dutch subsidiary. However, with the information available, we can draw a few conclusions. 

Financial results: 

  • Service revenue growth has gradually eroded in recent quarters and is now clearly negative. This is the third consecutive quarter of negative growth. If we look at service revenue on a 12-month rolling basis, a similar picture emerges. Growth has been negative for two quarters now and was -1.4% in the latest quarter. 
  • From the ARPU figures we can calculate the mobile service revenues at EUR 447 million, down 4.5 percent. This is also showing a negative trend, with now three quarters of negative growth. 
  • The service revenue from fixed services (consumer and enterprise) can also then be calculated, and this continues to grow, rising 47 percent to EUR 14 million. This is likely due to success on the FTTH market, where Vodafone has been active for a few quarters now. 
  • The postpaid mobile ARPU fell 7.5 percent, in line with previous quarters. Prepaid ARPU fell faster, down 23 percent. The high growth in data traffic is often cited, but the figure of 24 percent is below that of Vodafone’s last disclosure, of 35 percent over the first half of the fiscal year. 
Subscribers and usage: 
  • With the loss of 55,000 customers in the quarter, this was Vodafone’s worst quarter since 2010. While the year-on-year change is not as bad, this has been steadily worsening since the September 2011 quarter, to just 0.5 percent growth in the latest period. Prepaid is especially bad, with a loss of 82,000 customers, while growth in postpaid, at 27,000 new customers in the quarter, is slowing. Vodafone’s numbers also look poor compared to the competition. The much smaller Tele2 had net additions of 55,000. The comparison with KPN is more difficult, at it does not break down wholesale and retail numbers. In total, KPN consumer added 33,000 postpaid customers and lost 30,000 prepaid users. On the retail postpaid market, it added a net 24,000 new lines. KPN Business added a total 76,000 subscribers, all postpaid. 
  • The smartphone penetration rose to a record 56.9 percent, but the proportion of customers with a data plan is stagnating. It’s now at 73.4 percent, after a peak of 77.7 percent in the June 2011 quarter. Wi-Fi’s growing popularity may be playing a role here, leading to reduced demand for mobile data. 
  • Voice traffic (including wholesale customers) rose 0.6 percent, the third consecutive quarter with almost zero growth. We cannot say anything about minutes of use per customer, as the subscriber figures don’t include wholesale customers. 
  • On the fixed market the operator added 5,000 customers for a total 31,000 (consumer and business). We attribute this mainly to growth on the FTTH market.

Conclusion

Vodafone Netherlands' results were broadly weaker, both in terms of revenues and subscribers. It is losing market share to Tele2 and KPN, while in 2011 it was outperforming its rivals. T-Mobile still needs to publish results to get a full picture of the market, and our quarterly Dutch Mobile Operators incorporating all the results will be available in a few weeks.



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