Growth strong, but falling ARPU dampens Vodafone’s Christmas cheer

27 Jan 2005

UK-based mobile operator Vodafone reported its best Christmas performance for five years, adding more than 5.4 million users in the three months to 31 December to lift its worldwide proportionate subscriber base to almost 152 million. Trading in the run-up to Christmas beat consensus forecasts of between 3.9 million and 4.5 million net additions in the quarter. Growth was underpinned by a continued strong performance in Germany where the cellco signed up 843,000 customers, beating analyst expectations of around 800,000; service revenues also rose by 6% on the corresponding period of 2003. Elsewhere, Vodafone’s key markets of the UK, Italy and Spain also performed well adding, 641,000, 359,000 and 457,000 new subscribers respectively in the period. Only Japan rained on the parade, with the ailing Vodafone KK unit adding just 36,000 new accounts, down 40% on the previous quarter. Nonetheless, Vodafone chief executive officer Arun Sarin remained upbeat about his struggler, saying the company was on track to turn the business around. The unit has been adversely hit by delays in getting 3G handsets to market, which it says has affected sales volumes.

More worryingly, Vodafone reported that average revenue per user (ARPU) is falling or flatlining across the board, leading to renewed concerns that the cellco, and indeed other network operators, could struggle to generate substantial extra revenues from 2.5G and 3G data services. Rolling ARPU in the UK dipped from GBP318 in September to GBP314 in December, due in part to regulatory pressure on prices, but the trend was mirrored elsewhere. In Germany ARPU fell from EUR305 to EUR303, in Japan it dipped to JPY75,133 from JPY76,590, and in Italy – where demand for new data services has historically been strong – it remained flat. Only Spain bucked the trend with average revenue per user rising by eight euros to EUR408. Mr Sarin admitted that the company’s growth was by and large being driven by subscriber gains, but said there were signs that new services could drive future sales. Vodafone Live! reported its best ever quarter, adding 3.9 million new users to end 2004 with 28.3 million.

Vodafone is remaining tight-lipped over the immediate impact of 3G services – rolled out in 13 countries in 2004 – and will not release any Key Performance Indicators for UMTS until it reports for the period Q1 2005. However, it has said that it is pleased with 3G’s progress, which is in line with expectations, and its CEO reiterated that the group was on course to realise ten million Vodafone Live! customers with 3G by March 2006.

United Kingdom, Vodafone Group
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