Fullscreen User Comments
Share on Twitter Share on Facebook Share on LInkedIn Share on GooglePlus

Loading…

Loading…

Loading…

Loading…

Loading…

Vodafone questions the current viability of the UK’s network sharing deals

Vittorio Colao Vodafone

Vittorio Colao © WEF/Valeriano DiDomenico

As expected, the likely consolidation of the UK mobile sector is starting to ruffle a few feathers. On the day that Vodafone announced its Q3 financials, its CEO Vittorio Colao said that rival Three (soon to merge with O2) should withdraw from its network sharing joint venture with EE, now that terms of EE’s acquisition by BT have been agreed, and instead sign up to the network sharing agreement already in place between O2 and Vodafone.

“O2 has contractual obligations on network sharing with us,” Colao was reported as saying. “They should respect the obligations. Clearly [Hutchison Whampoa, which owns Three] had had an agreement with EE. The two are not compatible, so they should look at that, otherwise you create another concentration.”

BT CEO Gavin Patterson said it was too early to discuss network sharing specifics, although EE CEO Olaf Swantee did say its contract with Three “is a long-term relationship”, although it was mostly focused on legacy 3G coverage.

Vodafone also wants the UK regulators to force BT to separate its Openreach fixed line access division, with Colao reported as saying: "Ideally, a structural separation of Openreach would be optimal." A move not supported, or indeed envisaged, by BT’s Patterson.

Quickly following the first announcement of the BT and EE deal last November, Vodafone went on the offensive by announcing a move into the UK home broadband and pay-TV market, which is due to be launched this spring. It will use the 21,000km fibre backbone acquired as part of its £1bn purchase of Cable & Wireless almost three years ago. “It will be a lot of hard work in the UK to build our broadband and TV presence,” said Colao, especially is it tried and failed to offer fixed broadband back in 2006.

However, it is making inroads in the fixed-line market in Germany and Spain. “Our transition to become a fully unified communications provider is well advanced,” the company stated in its quarterly earnings release, adding that its total fixed broadband customer base in Europe increased to 11.1 million in the quarter.

Financial performance

Vodafone Group reported Q3 revenues of £10.88bn, representing organic (i.e. free of currency gains and other non-trading revenue) growth of 0.7 per cent, although group organic service revenues fell 0.4 per cent to £9.79bn. Europe saw the biggest decline, down 2.7 per cent, but this was offset by a 5.9 per cent rise in Africa, Middle East and Asia Pacific.

It stated that there was now a “steady recovery in Europe”, with a return to growth (0.9 per cent) in the UK, although service revenue in Germany fell 1 per cent, Italy fell 7.4 per cent and Spain fell 8.9 per cent.

“Growth in India has accelerated again, driven by data,” said Colao. “In Europe, improved commercial execution in both mobile and fixed over the last few quarters, combined with strong data demand and a more stable pricing environment, is supporting the steady recovery in the top line. Our recent cable acquisitions continue to perform well, with good progress made on integration.”

Vodafone’s Project Spring investment programme is “well advanced”, with mobile build now 50 per cent complete, having modernised 61,000 mobile sites, added a further 86,000 2G, 3G and 4G sites, and upgraded 50,000 sites to high capacity backhaul. Its capital expenditure in the quarter was £2.1bn

“With 4G coverage in Europe now 65 per cent, dropped call rates down to 0.64 per cent, and 26 million homes now passed by our own next generation networks, our customers are really beginning to notice the difference in experience that this investment delivers,” explained Colao. “We are confident that, over time, this will translate into further improvements in customer perception, ARPU and churn.”

As things stand, Vodafone looks like becoming the third-placed mobile operator in the UK, behind both EE/BT and O2/Three. If Vodafone wants to regain its crown, and is serious about becoming a “fully unified communications provider”, then it might need help from a deal with cable company Virgin Media, although Liberty Media (which controls Virgin) has ambitious European plans of its own. A deal with Sky looks less likely, given that Sky recently announced MVNO plans with O2.

Join The Discussion

x By using this website you are consenting to the use of cookies. More information is available in our cookie policy. OK