Monday, February 27, 2006

Vodafone stumbles again

Poor old Vodafone, stumbles again as their embattled management team announce a massive writedown of around $48bn and reduce their revenue and earnings outlook for this year citing competitive pressures.

I get the strangest feeling of deja vue with Vodafone. They feel to me and are even starting to behave like the old fixed line encumbants that went into a slow revenue and earnings death slide thanks to increased competition and then erosion of calling prices thanks to surplus capacity and then VOIP. They only recovered when they set up effective data services businesses offering mainly hi-speed Internet access.

Vodafone may be at the beginning of a similar cycle. Their call revenues per customer just continue to slide as pricing erodes thanks to increased competition and regulatory challenges.

And VOIP has only just begun to hit the mobile sector. Vodafone only have one way out - building an effective data services business. And they are taking too long to achieve it. This is their real achilles heal.

As 3G gets more broadly adopted Vodafone has to turn the overly expensive and walled off Vodafone Live into an open and cost effective mobile Internet service. They have to increase services, packages, open up Internet access to many, many more sites and reduce the price of all of this.

And they'd better do it fast or they'll slide even further and possibly have investors determine their future direction rather than management (which could spark a terminal death slide - just look at British Telecom).

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