Vodafone struggles to keep growth up

Cracks seem to be emerging in the Vodafone story. The world's largest publically listed mobile operator.

They beat forecasts for customer and revenue growth helped by emerging markets and sales of new 3G phones, but disappointed some investors by saying they would keep their US business. And they have maintained their outlook for 2006. So far so good.

BUT, they added a net 7.1M customers in the 3rd quarter of fiscal 2005, spanning the key Christmas period, as growth in emerging markets, Spain and the United States offset stiff competition in the UK, Germany and Italy.

FOR, the core European business showed scars from the mauling caused by increased competition and falling prices, with blended annual average revenue per user (ARPU) falling 7.8% year-on-year in Germany, 8.3% in Italy and 4.3% in the UK.

So service revenues were flat in Germany and fell in Italy. These are two of Vodafone's largest and most strategic markets.

And this all means only one thing, that Vodafone is not being as successful at selling data services to their customer base as they should be and as some of their competition is. For O2 announced stellar results yesterday.

And until data services, including music, games, email, texting, internet surfing etc start taking off, ARPU's will keep falling, for the cost of making calls on mobile phones will keep dropping as they have in the fixed line world.

Vodafone needs to get a grip on Vodafone Live and get a grip on it fast. There are far too few free or low cost bundled services. If this does not change fast, data services will not take off. And broadcast TV to mobile phones will not come to their rescue. They need cheap bundles of texting, subscription based music services, lots of valuable internet content sites for free and better games devices. And they need them now!