telecommunications, posted: 31-May-2006 06:17
Mobile telephony giant Vodafone says it made a vast loss for the year to March: after slashing the value of assets by £23.5 billion, the company lost £21.9 billion. In NZ dollars, that's over $64 billion, or close to half of the country's GDP.
Despite the huge loss, Vodafone intends to bump up dividends by almost a half, and pay out £9 billion to share holders. This, and the fact that the loss came in at slighly less than what analysts expected, pleased investors and sent Vodafone's share price upwards again.
While this sort of thinking seems bizarre to normal people, investors looked beyond the one-off loss and saw a £8.8 billion profit on the back of some 21 million new customers instead, with the asset write-down excluded. That's up from £6.41 billion the year before.
Vodafone may have succeeded in keeping shareholders happy, but it looks like staff worldwide are in for some pain: over 400 will get the heave-ho in the UK alone, and CEO Arun Sarin's keen to cut costs elsewhere in the group, which usually means laying off more people.
Sarin sold off Vodafone Japan to Softbank in April this year, and is said to be looking for a buyer for Vodafone's stake in Verizon Wireless in the US. He has also been quoted as saying Vodafone may quit other markets where growth prospects aren't strong.
It will be interesting to see what happens in New Zealand where the very profitable Vodafone subsidiary's prospects are under threat from increased regulation as well as competition from Telecom.
What will Vodafone do to keep growing? Well, mobile games seem a dud, according to Graeme Ferguson, Vodafone's Head of Content, and while. Instead it now looks like Vodafone wants to become an ISP and even take advantage of unbundling by installing DSL gear into exchanges. The local Vodafone subsidiary has been trying to buy local ISPs, I hear. This makes sense when you look at what Telecom is thinking of providing next year, namely a unified service for all your communications needs - traditional voice, data, mobile - with video on top.
Unless Vodafone can match that kind of offering, it'll be dead in the water. The only way to do this currently is through fixed, wired broadband as not even the HSDPA upgrade will boost wireless performance sufficiently to deliver a combined or converged service.
Where this strategy change leaves Vodafone's "walled garden" Live 3G content portal remains to be seen, but it looks a bad fit in its current form. Vodafone will have to modify the portal to provide content suitable for a converged platform, and not just a mobile one. Since such a portal would be competing with cheaper or even free alternatives, it's hard to see any future for the Live 3G service - it could well be one of the items on Sarin's cost-cutting list.
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