Vodafone 2011 Annual Report Download - page 27
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Vodafone Group Plc Annual Report 2011 25
Business reviewBusiness review
Deliver value and efficiency from scale
Against a background of continual price pressures due to
competition and regulation we continually seek to improve
our cost efciency. During the year we reduced our European
operating costs by 4% on an organic basis, equivalent to
saving over £140 million. We have used the savings to fund
investment in customer facing activities and growth areas
such as data and enterprise services.
Our cost advantage
Based on external independent benchmarking we have
favourable comparative cost positions in many markets. This
reects both our scale as one of the world’s largest mobile
communications companies by revenue and our ongoing
cost focus.
Cost position vs competitors
Network: cost to carry a unit of data(1) Top quartile position
Terminals: cost to purchase
a handset(1) Top quartile position
General supplies(2) 4% better than
global benchmark
Notes:
(1) AT Kearney Executive Summary Report.
(2) The Hackett Group’s world class benchmarking.
Our achievements to date
We have been taking advantage of the large scale of our
networks. We are sharing base station sites where this
makes commercial sense in order to reduce site rental and
maintenance costs. We have also renegotiated leases on most
of our sites, are standardising the technology we deploy, and
have reduced the energy consumption of our sites and
switching centres. We are reducing costs in maintenance and
eld activities in particular through outsourcing.
We use the Vodafone Procurement Company, the central
Group procurement function based in Luxembourg, to
leverage our scale to achieve better prices, more value and
drive standardisation across the business. We have further
reduced costs by centralising the purchasing of handsets. Our
large size also allows us to drive ethical, health and safety,
labour and environmental standards with our suppliers and
also to get the best rates on warehousing, inbound and
outbound logistics, and repair costs.
Our shared service centres in Hungary, India and Egypt have
allowed us to reduce costs as well as deliver better service.
Additionally, we have outsourced application development
and maintenance to third party providers on multi-year
competitive tenders.
Delivering cost efficiency from sharing resources
This year we established two shared service centres
in India to provide quick, simple and cost effective
customer contact points for our technology and
business operations and data services for our finance
and administration functions in seven European
markets and across India. We expect to gain
significant benefits to help consolidate, standardise
and optimise the way we run our operations.
70%
New radio sites
deployed this year
built as shared
sites to reduce
operating costs
Over
£140m
Reduction in organic
European operating
costs due to our
cost saving