[3GScottishUser]

From The Independent (12/11/2006):

Vodafone will tell the market on Tuesday that earnings for the first half of its financial year have hit the £6bn mark and that the outlook for its core business in the UK is improving.

The mobile phone giant, which has been beset by boardroom wrangling, will also announce that its operations in developing markets and in the US are still growing strongly, as it looks to leave its recent troubles behind.

In a research note last week, Andrew O'Neill, an analyst at Bernstein Research, said: "Rather than immediate earnings, we are more focused on longer-term signs of improving volume growth and falling pricing risk in Europe, as well as signs of a greater cushion for estimates from any other sources of upside."

Arun Sarin, Vodafone's chief executive, may also give indications that the company has an appetite for further acquisitions in Africa, Asia or eastern Europe as it looks to accelerate growth.

It is believed that two-thirds of Vodafone's new contract customers in the UK now buy products direct from the company's stores and on its website. This trend will reduce the cost of acquiring new customers and boost margins at a time of falling tariffs.

In the past year Vodafone has lost market share in the UK in the face of aggressive and innovative pricing from the likes of T-Mobile and O2. But it is believed that the company now has the lowest rate of contract churn (the rate at which customers defect to other networks) in Britain.

Vodafone recently decided to stop selling contract-based products in Carphone Warehouse stores, in a bid to reduce the level of subsidies that it pays to third-party retailers.

Vodafone's share price has risen steeply in the past few months following the appointment of Sir John Bond as chairman. Sir John is widely credited with quelling recent boardroom unrest and improving the group's relationships with its institutional investors.

http://news.independent.co.uk/business/news/article1963376.ece

[Hands0n]

I said it before and I'll say it again, Sir John is a huge asset to Vodafone, if for no other reason than his historical banking links. The City trust Sir John and Vodafone would be crazy to ignore the advice and guidance that he gives them, no matter how unpopular it may be. He drove HSBC to become 3rd largest bank in the world and may even repeat the exercise with Vodafone - maybe make it the globes largest mobile network opertor?

This is all good news for Vodafone and its investors. Maybe also its customers in the short term, certainly in the longer. It is creditable that Vodafone has attained the reputation of having the lowest rate of contract churn, such stability for a listed company is vital.

Vodafone are going to have to do better, much better, as far as their recent Broadband offering is concerned. I do believe that they are way off the base with that and will be undermined by all of the rival network operators. The recent offering by Orange is tantalising as highlighted by 3GSU recently. I have investigated it myself and am seriously considering moving from Cable back to a BT line and Orange's ADSL offering. Not by way of a churn away from Vodafone but when the Mrs contract with O2 comes up for renewal. The cash savings to us by eschewing Telewest and O2 represent near on £50 a month back to the family purse. Not something that can be ignored for long, if at all! Vodafone have nothing even close to that, at the moment.

[Ben]

I don't know why I'm in favour of Vodafone's direct sales strategy and pleased by its success, but I am.

Perhaps it's because, with everything becoming such a convergence of complication these days, direct sales offer a real hope of customers getting products and services they understand. Perhaps it's because Vodafone offer a high quality of service, and cutting back on those commission payments could result in better deals for customers. Or perhaps it's simply because the third party sellers have done such a dismal job of selling mobile phones over the years, muddying the water and making 'impartial' decisions based on how much a network is prepared to pay them. Whether none, one or all of the above, I am pleased by Vodafone's success, despite the ramifications it could have for the mobile retail industry if the trend continues.

As for churn, well that's just fantastic. With their range of handsets and robust services it could be argued that currently Vodafone don't need a lot else to encourage loyalty, especially when they're dealing with their customers directly and so removing the possibility that, come upgrade time, they'll be switched out to whichever network is paying the highest subsidies. However, as Hands0n discusses, with converged offerings like Orange's now in play things are certainly going to get tougher, especially for a company like Vodafone that has so far only managed to offer broadband via BT.

I certainly don't see a picture of Vodafone's future that would justify their rising share price.

[3GScottishUser]

I have to say I agree with the above...

I know its maybe not best for consumers to have fewer choices but I suspect Vodafone and some of the others have been used by shrewd 3rd party retailers to generate commission an in so doing, simply encouraging churn.

High time the market settled down and networks compete on services and prices and not false (cashback based) headline pricing that reatilers use to promote churn.

It would be better if contract buying decisions were based on value over the whole period of the contract than the silly and misleading low monthly costs headlined by many retail and on-line outlets.

One can appreciate Vodafone's position!