Network issues dent VHA’s FY2011 results

24 Feb 2012

Vodafone Hutchison Australia (VHA) has revealed that, in the wake of network and customer service issues that affected a number of its customers in late-2010/early-2011, in the twelve-months to end-2011 it saw a 7.3% year-on-year drop in subscribers. At 31 December 2011 the cellco’s wireless subscriber base totalled 7.022 million, down from 7.576 million a year earlier, of which 2.668 million were signed up to handset-based 3G services (up from 2.149 million at end-2010), while a further 819,000 had taken up VHA’s mobile broadband service, down from 855,000. VHA, however, noted that in the second half of 2011 the rate of decline in the customer base slowed by more than half, in part arguably as a result of what it said was its decision to take ‘decisive and immediate action to address these problems by accelerating its investment in building and upgrading the Vodafone network and introducing new customer service initiatives.’

VHA outlined some of the progress it has made as result of its accelerated investment plan, noting that since the merger between Vodafone Australia and Hutchison 3G Australia in June 2009 it has now spent around AUD1 billion (USD1.07 billion). It reiterated the key elements of its network improvement programme, with those being: the rollout of a new 3G 850MHz network to improve in-building coverage and capacity; an upgrade to its existing 2G and 3G network to provide more coverage and capacity; the replacement of network equipment across all sites and the installation of 4G-ready equipment; the construction of new cell sites to increase coverage; and the upgrading of the core network and transmission network. In line with these plans, VHA stated that it now has 1,040 base stations live on the new 850MHz network, while a total of 1,500 sites are expected to be online by the middle of this year. The network equipment replacement programme, meanwhile, has reportedly been completed across 4,114 sites, with work now finished in Western Australia, the ACT and the Northern Territory, and by the end of 3Q2012 all required sites are expected to have been replaced with the new Radio Access Network (RAN) equipment.

As perhaps expected, the reduced subscriber base and increased expenditure on its network impacted on VHA’s financial results for the year to end-December 2011. It noted that total turnover fell by 4.7% y-o-y to AUD2.29 billion (USD2.4 billion), while service revenues dropped to AUD2.04 billion, representing a 7.1% annual decline. Earnings before interest, tax, depreciation and amortisation (EBITDA) fell by 34.3% compared to FY2010, standing at AUD312.7 million in 2011, while capital expenditures for the twelve-month period reached AUD373.8 million, up by 24% year-on-year.

Commenting on the results, VHA chief executive officer Nigel Dews said: ‘With a focus on continuing to invest in network and service, and maintaining a tight control on cost, we expect further operational improvements. We are confident that we have the right strategy to return to profitable growth.’

Australia, Vodafone Australia (TPG Telecom Limited)