Vodafone NZ edges ahead of Telecom

By PETER GRIFFIN telecoms writer

It is a mere smudge on its multinational parent's balance sheet, but Vodafone New Zealand's results show it has surpassed arch rival Telecom and is on track to break the $1 billion revenue mark by 2005.

In the year to March 31, Vodafone New Zealand's revenue jumped 20 per cent to $841 million, while customer numbers were up 195,000 to nearly 1.3 million, giving it 51 per cent of the mobile market.

The operation, formed through the acquisition of Bell South's fledgling network 4 1/2 years ago, has made rapid progress. Some would say it has been canny global marketing that has seen the group rack up nearly 120 million subscribers worldwide.

Vodafone will not release detailed local accounts until September. But last year it made a profit of $48 million, and managing director Tim Miles said that had increased.

In its accounts, Vodafone New Zealand is lumped into the "other Asia Pacific" category, separating it from Vodafone's massive operation in Japan. That category reported group operating profit increased 68 per cent to £111 million ($313.7 million) on turnover of £825 million. Vodafone New Zealand outperformed its sister companies in Australia and Fiji.

The growth came during a busy year for Vodafone: it enabled global data roaming for switched-on travellers, introduced SIM-card-based services and launched a major attack on Telecom's stronghold, the business market.

It also supported broadband player Walker Wireless in three successful bids for Government Probe tenders in Southland, Wairarapa and Northland. As a result, larger volumes of data are passing over Vodafone's network in the form of MMS picture messages, Vodafone Live content and mobile business traffic.

Data now comprises nearly 13 per cent of Vodafone's revenue, up from 9 per cent in the previous year. Miles said average revenue per user was up 4 per cent.

On a global level, Vodafone delivered another staggering loss of £9.82 billion, down from £16.2 billion in the previous period.

But Miles said the loss was meaningless. The real measure of Vodafone's success was at the operating level, and it was doing well there.

"Globally many of our competitors are constrained in what they can do because they are trying to repay debt. We're able to reinvest huge chunks of cash," said Miles, who claimed Vodafone's mobile capital expenditure exceeded Telecom's "by multiples".

He would not reveal Vodafone's capital spend, but it may increase if Vodafone follows other parts of the group in rolling out a third-generation (3G) network.

Telecom said its mobile capital expenditure was $70 million this financial year.

Miles would not put a date on the expensive upgrade to wideband cdma technology. But when it did happen, Vodafone would have Vodafone's 3G operations in Japan and Europe to learn from.

Vodafone will be a contributor to the new Kiwi Share, which subsidises Telecom's obligation to service loss-making customers.

Miles said the Kiwi Share effectively penalised Vodafone for creating competition and should be abolished.

"Telecom is at a greater risk of losing money if we go into Southland for example, therefore our risk of paying them money goes up."

Instead, Vodafone proposed that unprofitable regions be auctioned to telcos that believed they could run viable businesses.

"If there are unprofitable customers, bundle up the demand like Probe and tender it out. You'll find people would still be covered."