Vodafone Hutchison Australia could keep falling: analysts

VHA has one million less customers than last year

Vodafone CEO Inaki Berroeta has taken the reins of the telco's turnaround effort.

Vodafone CEO Inaki Berroeta has taken the reins of the telco's turnaround effort.

Analysts predict further customer losses for Vodafone Hutchison Australia (VHA) in the near term as the telco tries to steer the ship around.

At the end of the quarter ended 31 March, VHA had one million fewer customers than it did at the same time last year, according to results reported by the global Vodafone company.

VHA bled 44,000 mobile customers in the recent quarter, shrinking its total customer base to 4.96 million. At the end of the same quarter last year, VHA had more than 6 million customers.

Vodafone, which owns half of VHA through a joint venture with Hutchison Telecom, said that Australian service revenue sunk 9 per cent over the year ended March 31 "as a result of a lower customer base stemming from service issues in prior years."

“We've seen when tech brands are hit they keep falling – think Blackberry – and that is not impossible with Vodafone in Australia,” IBRS analyst Guy Cranswick told Computerworld Australia.

“The loss trend seems to be continuing from the report and that means customer numbers could fall to 4.5 million in the next year.”

Chris Coughlan, an independent telecom analyst, said he expects losses to continue at least through 2014 and possibly into 2015.

However, Vodafone will face new challenges by that point when Telstra and Optus bring online 700MHz spectrum won in the recent Digital Dividend auction, Coughlan said.

Vodafone declined to participate in the auction for this “beachfront” spectrum which travels longer distances and provides better indoor coverage than higher frequency spectrum used by mobile operators today.

Read more: Vodafone Hutchison CEO: We’re in the recovery phase

“The spectrum purchased will allow Telstra and Optus to deploy much more 4G coverage and capacity depth than Vodafone,” he said.

For this reason, it would seem critical for Vodafone to buy the unsold 700MHz spectrum as soon as it comes up for auction again, Coughlan said. However, depending on the rules, VHA will have to cough up enough money to outbid both Telstra and Optus who may also seek to bolster their spectrum repositories.

In its global financial results, Vodafone said it has made "significant improvements" in its Australian network over the year.

"The turnaround plan remains on track, yielding improved levels of network performance, net promoter score and customer base management. The EBITDA [earnings before interest, taxes, depreciation and amortization] margin was improved by 14.8 percentage points, as a result of restructuring and stronger cost discipline."

Vodafone also noted that its Australia division launched 4G services during the year and said this faster connection creates opportunities for more revenue.

"Early experience from 4G shows us that customers use roughly twice as much data compared to 3G data usage, driven principally by video streaming."

Cranswick said it’s good that Vodafone has managed costs “but without growth in customers and [average revenue per user (ARPU), they are really still nowhere at all.”

VHA recently saw the departures of its CEO, CIO and head of corporate affairs – two of whom left for jobs at NBN Co.

Adam Bender covers telco and enterprise tech issues for Computerworld and is the author of dystopian sci-fi novels We, The Watched and Divided We Fall. Follow him on Twitter: @WatchAdam Follow Computerworld Australia on Twitter: @ComputerworldAU, or take part in the Computerworld conversation on LinkedIn: Computerworld Australia

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