Vodafone behind again

Russell Stanners

Vodafone has given up market share to Telecom in mobile phones for the fourth quarter in a row - a trend analysts expect will continue.

Vodafone New Zealand yesterday announced quarterly results that showed an incremental drop in market share, to 54 per cent from 54.7 per cent.

While chief executive Russell Stanners said he did not see this as a "material movement in market share", the company only managed to add 27,000 new customers in the quarter, bringing its total base to 1.9 million. Telecom added significantly more customers - 72,000 - in its most recent quarter, bringing its total to 1.6 million.

Analysts suggested several reasons for the differing momentum in customer additions. Telecom launched its 3G service - which features advanced video and internet capability - in November 2004, nine months earlier than Vodafone, and developed a strategic and marketing advantage over that time.

"You could say that 3G has been quite instrumental, but it's not just about 3G - it's really been a marketing coup rather than a technology coup for Telecom," said Chris Loh, senior telecommunications analyst at IDC. "It fulfilled Telecom's need to act and talk like a leader."

Vodafone was slow to react to Telecom's discounted $10-a-month text message offering, which also cost it customers, Loh said. Telecom had thus developed a "turn-on-a-dime" flexibility that had formerly been the sole domain of Vodafone.

Sydney-based telecommunications analyst Paul Budde said Telecom had the advantage because it offered better prices and "mobile is very much price-driven - whoever has the best price plan is attracting more customers".

Budde also said Telecom had a long-term advantage because the company could offer fixed-line-to-mobile deals and bundles, whereas Vodafone could not.

Telecom has signalled that "intelligent phones" - mobiles that automatically switch into land lines when in the user's home - are not that far off. "There is an opportunity for Telecom to poach more customers away from Vodafone than the other way around," Budde said.

Stanners said it was too early to expect big returns from Vodafone's 3G service - launched in August with video calling and music download features - but the company was banking heavily on it.

The worldwide Vodafone Group is halfway to its projected goal of 10 million 3G customers worldwide by March 31, 2006, Stanners said, although he declined to say how many were added in New Zealand.

The New Zealand unit does not report its financial results.

The Newbury, England-based parent reported yesterday that ebitda (earnings before interest, tax, depreciation and amortisation) rose to 6.7 billion ($17 billion) on 9 per cent higher revenue of 18.3 billion. But a warning from the company that its struggling Japanese unit would hurt 2007 profit sent shares tumbling 10 per cent - its biggest one-day decline in 3.5 years - on London's FTSE.

Market share

* Vodafone has 1.9 million mobile customers and Telecom has 1.6 million, for a total of 3.6 million. There are about 3.2 million adults in New Zealand.

* The market is expected to grow ever younger, with more nine- and 10-year-olds becoming customers.

* Overall mobile penetration of the entire population is predicted to exceed 100 per cent by 2009 as more users make use of multiple devices.

- Additional reporting agencies