Vodafone targets O2 in new assault on home market

Telecoms giant may move to supply the iPhone after slipping behind main UK rival

Vodafone is upping its assault on O2, its largest rival in the UK, by overhauling its strategy and targeting the iPhone in an attempt to win back its share of the home market.

O2 is expected to lose its exclusive deal for the iPhone in the UK possibly as early as September, and Vodafone yesterday expressed an interest in the product. "When Apple wants to have a discussion, we will engage in that discussion," Vittorio Colao, the chief executive said. "The UK is clearly the market where the iPhone has the highest impact. O2 is our main competitor and we have our eyes on them because we want to beat them."

The comments came as the group announced that revenues hit £10.7bn in its first financial quarter, almost a tenth higher than the corresponding period last year. The rise mainly came through positive currency moves and benefits from acquisitions in emerging markets.

The results also highlighted the continued pressure in Europe, where service revenues fell 4.4 per cent "reflecting economy and mobile termination rate cuts".

Revenues in the UK fell 4.7 per cent to £1.1bn in the first quarter driven by "intense competition and economic pressures". The group, which has 25 per cent of the market, has fallen behind O2 with 27 per cent and has set about overhauling its local strategy.

Mr Colao said the group was "repositioning" in the UK after admitting a perception in the market that Vodafone charged more, which "perhaps was not the best place to be in a recession".

He added: "We had a heritage of a brand more aimed at businesses and high-value customers. We are now going more into the consumer value space."

To boost its UK business, Vodafone recently announced it was to sell phones through Carphone Warehouse after a three-year exile. The move doubles its outlets to 1,600.

However, Vodafone refused to comment on another move that would make it the largest player in the UK: a takeover of T-Mobile. The companies are understood to have met last month over a possible deal.

Mr Colao said: "The UK has more operators than other markets. That doesn't mean lower prices for customers, just inefficiencies. If there is a consolidation opportunity, we will look at it."

The group unveiled a cost-cutting programme in November, aimed at slashing costs by £1bn by the end of its 2011 financial year. Mr Colao said the drive was on track and expects 65 per cent of the cuts to be made by the end of this financial year.