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Technology / AI and automation

VODAFONE PROSPERS DESPITE RECESSION AS IT RETAINS ITS EDGE OVER CELLNET

Vodafone Group Plc has performed well during the first six months of its fiscal year, and is forecasting an equally good year-end result due to careful pruning of overheads. Pre-tax profits rose 23.5% to ?160.2m, while turnover grew 12% to ?319.8m. However, these results are for the six months ended September 30 1992, whereas in previous years they were for the first 28 weeks of the financial year, so the 1991 figures have been restated. Chief executive Gerry Whent stated that the market for mobile communications was very good, although an 180-month review of group performance showed that the entire period had been effected by recession. Net subscriber growth had definitely improved over the last six quarters, he said, but gross had been up and down. Nonetheless, he felt encouraged by performance in the last two quarters, which was much better than the comparative period last year. Churn, or the number of subscribers leaving the network, was also erratic, being affected by service providers deciding to defect elsewhere. Some 14,000 are expected to go in December or January. Nonetheless, levels of new business were reportedly higher than migrations, if below original expectations. The current advertising campaign has apparently generated 86,000 leads at a take-up rate of one customer in eight. Spend per customer increased, although this was not reflected in revenues due to the discount scheme implememented at Cellnet. During September, Vodafone connected its 750,000 subscriber to its mobile telephone network, and overall market share has remained fairly static at 56%. In October, the group introduced its LowCall tariff, which provides reduced line rental costs with higher call charges. It is aimed at non-business users, who make a low number of calls. Cellnet originally estimated that migration of business customers to this service would be around 40%; Vodafone believed it would be around 15% to 20%.

Relaunch in the spring

Vodafone has now revised its estimates, saying that take-up rates will be about 7.5% by March 31, tailing off after that. Changes the other way are expected to be minimal, perhaps 1% at most. Spring 1993 will see the relaunching of Vodafone’s Groupe Speciale Mobile digital network. The aim is to make the service competitive with analogue. To make it viable commercially, it needs to be made available across the whole of Europe, so roaming agreements with other major European countries are currently being negotiated. Similar networks are being implemented there too and these will form the basis of a digital Micro Cellular Network, expected to be launched in the second half of 1993. Vodafone’s digital service is now available to 50% of the UK population, and will cover 90% by spring 1993. It has 50 paying users at the moment, with another 300 on line, but expectations are that it will be a saleable service by April or May next year. Falling hardware prices should also accelerate the number of subscribers, Whent believes. Although Cellnet claims to have stolen the edge in the retail market with the new Sony Corp telephone, Whent asserted that this situation will last for only three or four weeks at most before his company will negate it totally; his people have now cracked the code for connection to the new phone, as well as the security code. Whent attests to having had his eye on this market for the past eight years, although attempts to break into it in the past have failed. However, he was pleased with the initial results of the Office of Telecommunications quality trials, where 60 UK routes have been tested over a seven week period. Vodafone scored 92.9%, and Cellnet, 88.5%, although Cellnet was disadvantaged by its Scottish network going down for 11 hours during this period. The other companies within the Vodafone group performed well. Vodac, which is a service provision company, was reportedly steaming ahead with new connections and equipment sales, and excellent profitability levels. Vodata, which provides information services, saw revenues up 75%, while Vopage is said to be the fastest growi

ng paging company around. Telecell is making nice profits, and growing monthly. The French operation, Vodafone SA, another service provider, is making very high margin sales and is showing high productivity levels. Whent says that it is going through the final loss-making stages and is expected to be profitable by next year. The Greek start-up is performing way ahead of expectations, and is expected to reach break-even within two years. According to Whent, it in a prime position to tap a massive and largely untried market. Operations in the Pacific Rim are also doing very well, showing a good return on investment and improving all the time. The switch from analogue to digital in Hong Kong is now complete, and there are now the same number of digital users as analogue users – the analogue network is now full. The only down-side was joint venture company, Orbitel Mobile Communications Ltd, which manufactures handsets, infrastructure and terminal equipment. It has been hit heavily by Motorola Inc, Nokia Data and Siemens AG pulling out of the deal, cutting cash levels by 30%. Whent explained that many of the people contributing to the venture had been hit by problems of their own, and that getting products off the line was taking more time and effort than had been anticipated. Nonetheless, he said that his company had a debt of honour to the UK government to manufacture in the UK, following an agreement made some eight years ago. So, although the forecast ?7m turnaround will not be achieved now, Vodafone will persevere with it.

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CBR Staff Writer

CBR Online legacy content.