Vodafone pushing for more business users

By PETER GRIFFIN

The newly appointed head of the country's second-ranked mobile operator, Vodafone, says he will be looking for growth in a flat cellphone market by starting a push for more business customers.

Tim Miles takes the reins as managing director of Vodafone on January 1, replacing Arthur Neely, who has been holding the fort since the departure of Graham Maher to head Vodafone's Australian operations.

"If you said I was the fourth Vodafone managing director in about two years, you would think it was carnage at this company," said Mr Miles.

"But normally when things aren't right people leave - and no one's leaving."

The former New Zealand managing director of Unisys returned from a posting with that company in Philadelphia in July and joined Vodafone the following month.

He arrives as Vodafone customer numbers continue to grow (now at 1.08 million subscribers), but at a time the money in selling phones and airtime is not what it used to be.

Telecom, with more than 1.3 million mobile subscribers, is the market leader, and claims to have been luring Vodafone customers to its new CDMA network, which now has 50,000 customers.

That is a claim Vodafone disputes.

"Since Telecom launched CDMA we have had the lowest churn ever in the history of this company. We've lost the fewest customers ever," said Mr Miles.

"[Churn] is at a record low when Telecoms marketing activity has probably been at an all-time high."

Each mobile company has been battling to win customers from the other.

Mr Miles said the hype that accompanied Telecom's CDMA launch was not planned for Vodafone's 2.5G GPRS network, which has been functional for the best part of a year.

"CDMA and GPRS don't mean anything to the customer. For them the network itself isn't the issue."

This year Vodafone announced its first operating profit, $78 million before interest and tax in the year to March 30.

Mr Miles is not making any revenue or profit predictions about this financial year, saying only that Vodafone expects "another good year".

In the quarter to September, it picked up 87,000 new customers. Vodafone's Australian operation lost 41,000 customers in that same period.

Although happy with the rate of customer take-up, Mr Miles said the link between signing new subscribers and growing revenue had gone.

"As the market gets more and more penetrated, the people who start to buy phones are not high-use customers.

"They're the people who buy one and leave it in the glovebox of their car."

Growth will come from offering new services, especially in the business market, where the consumer-oriented Vodafone brand is less well established.

To do this, Vodafone New Zealand will borrow ideas from its sister companies and invest more in local application development.

Set up under the working title of PartnerCo, a new software division will cover the entire Pacific region and be headed by Mr Neely, Vodafone's former chief of engineering .

Similar application development initiatives are already run by Telecom and Wellington-based joint venture Ericsson Synergy, which in August won $1.6 million in funding from the Government.

Mr Miles will inherit some sticky regulatory issues, including the mandatory roaming provisions in the Telecommunications Bill, which potentially give competitors access to Vodafone's infrastructure.

He wants to examine the bill in its final form before making any predictions.

"Were on record as saying were disappointed with the way the Government has handled this. This thing was sort of dropped on the market."

He will not comment on reports that Vodafone has been strenuously lobbying the Government to change aspects of a supplementary order paper dealing with the mandatory roaming issue, but says the shape of the new legislation could have serious implications for Vodafone.

"If [Econet] come in and are given a free ride, then they are in the market with a whole different set of economic conditions than Telecom and ourselves."

He said that if Vodafone had to make capital investments to provide access to cellsites for new entrants, the "level playing field" that the bill is aimed at providing would not be achieved.

The regulatory environment aside, Vodafone and Telecom face the task of squeezing new revenue out of voice and of making data services attractive to their millions of customers.

In the Pacific region of Australia, New Zealand and Fiji, non-voice services accounted for only 6.7 per cent of Vodafone's service revenues in the 12 months to September 30.

Only 0.2 per cent came from internet data services.

These figures illustrate the challenge the mobile phone system operators face in their attempts to increase data traffic on their networks.