Vodafone 2012 Annual Report Download - page 18

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Vodafone Group Plc
Annual Report 2012
Chief Executive’s review (continued)
Priorities
All the elements of our Group strategy are
covered in detail elsewhere in the annual
report. In this section, therefore, I think it is
more useful to give you some deeper insight
into what I see as the key priorities for the
business over the year ahead, and where
Vodafone’s leadership team will be focusing
their energies. Some of these priorities
are, indeed, specic constituents of our
strategy; others reect our ability to inuence
the markets in which we operate or the
resourceswe have at our disposal to execute
ourstrategy.
Data
After many years of investment and
technological development, the customer
experience of mobile data services in
developed markets has now generally
reached very good levels, with for example,
high quality streamed video now widely
available. However, operators in Europe have
three signicant challenges when it comes to
data services: pricing, commercial costs and
customer usage.
Our progress on pricing is inconsistent. In the
best markets we are successfully generating
incremental ARPU of €10 a month as we
migrate customers to smartphones and data
packages. However, in others the uplift is
more marginal, often driven by the level of
competition in the market. Our goal over the
next 12 months is to achieve a more consistent
revenue return from data – through faster,
more reliable networks, signicantly enhanced
customer service, and a range of new and
differentiated services accessible through
thehandset.
Unfortunately, almost all of the incremental
ARPU we are generating ends up being
invested in commercial costs. The smartphone
market is still skewed to the high end, which
has driven signicant increases in average
customers acquisition and retention costs over
recent years. Looking ahead, we see scope for
more competition in the handset market as
new vendors seek to enter the market and
more established players look to grow in the
mid-tier. This should drive down our customer
investment costs.
The pressure on our top line, particularly in
Europe, is intense and we need to protect
protability through better cost discipline.
Commercial costs are the biggest single
cost in our business and we will not
successfully stabilise margins unless we
manage these acquisition and retention costs
morerigorously.
Finally, we need to nd a way to stimulate
customer consumption of data. Average data
usage on a smartphone in Europe is around
a third of that in the US and less than a fth
ofthat in some parts of Asia. We have to work
more effectively at showing customers they
can use data more freely while still controlling
their spend, and also helping them understand
what they can actually use data services
for. The ongoing upgrade to our European
network, creating a platform which offers
high speed data services everywhere we
provide a voice connection, will in itself breed
additionaldemand.
Regulation
The telecoms industry continues to
experience intense regulation on mobile
termination rates (‘MTRs’), and voice and
dataroaming. In addition, auctions of new
spectrum are often structured to favour new
entrants at low prices. The consequence of
these actions is to suppress investment in next
generation mobile and xed networks, and
thus to limit our ability to provide high speed
data across abroad footprint. This universal
access to high speed connectivity is a key
goalof regulators across Europe, and will not
be achieved if the current onerous level of
regulation continues. Isee it as a major priority
to continue to workwith my industry peers
and local and EUregulators to nd a fairer
balance which protects customers while
encouraging investment and competition.
I have been very vocal in my objection to this
ongoing regulation, much of which has not
produced the results intended by regulators.
For example, reductions in mobile termination
rates since 2009 have not meant that prices
fall faster for mobile consumers and have not
encouraged xed line customers to make
more calls to mobiles. If anything, the opposite
has happened. I believe regulators should
avoid auto pilot regulation that does not check
whether regulation has achieved its purpose.’
“ We have continued to
stimulate data adoption by
encouraging customers to
upgrade to smartphones,
and offering a broad portfolio
of these handsets across
arange of price points.”
Our strategic priorities:
a Mobile data
a Emerging markets
a Enterprise and total
communications
a New services
Customer experience
Our retail stores around the world
are being recongured to ensure
customers leave the store with their
smartphone ready to use with technical
experts available to resolve customers’
questions and device problems. By May
2012 4,400 of our stores provided these
services and during this year we will
further expand the roll out.
More detail
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