The lower subscriber figures don’t matter too much, as Vodafone’s focus is now on boosting average revenue per user (ARPU). Unfortunately, 12-month ARPU figures were also down. Data revenues were up, which Vodafone believes will allow it to raise ARPU going ahead. However, the challenge will be in migrating users from SMS to higher-value messaging services.
Vodafone has reported lower-than-expected subscriber growth for Q1 2002.
Vodafone, the world’s largest mobile operator, on Thursday released worse-than-expected subscriber growth figures. It gained 1.3 million new subscribers globally in Q1 2002, compared with analyst expectations of 1.4 million.
This followed earlier poor subscriber growth from its US joint venture, Verizon Wireless, and a six month delay in Japanese unit J-Phone’s 3G launch. These combined factors drove Vodafone’s share price down almost 10% between Monday and Thursday.
Vodafone is focusing on boosting ARPU rather than subscriber numbers. This is a natural move as many of its key markets around the world are now approaching saturation point. This must be the focus, then, if the company wants to improve profitability going forward.
Unfortunately, ARPU has fallen in the company’s major markets: in the 12 months to December, it was GBP278 in the UK, E303 in Germany, and Y93,550 in Japan. For the 12 months to March, it came in at GBP276, E298, and Y91,903. This is a worrying sign for the company.
Using these 12-month figures may not be fair though. The company claims that it has turned its business around and ARPU will now follow suit. Higher-margin data revenues are indeed up. In March, data accounted for 13% of total revenues, compared with 10% last March.
However, the quality of data is important. In the UK, over 91% of data revenues came from SMS. This area is becoming commoditized, moving the focus of most operators around Europe onto the higher-value multi-media messaging (MMS).
The problem with this, though, may be in convincing consumers to start using MMS. After all, new handsets are required and operators are attempting to rein back the loss-making handset subsidies that they have provided over the last few years. Vodafone will also need to convince users that the higher value of MMS services justifies their significantly higher cost – is a picture worth ten times more than 160 characters?
Related research: Datamonitor, 2002: Unified Messaging