Vodafone taps into Europe: Cellular phone firm looks to foreign mobile markets to thwart growing competition in Britain

Click to follow
The Independent Online
VODAFONE, the cellular telephone company, is accelerating its drive into overseas mobile telephone markets as competition increases at home.

The group plans to incur start- up costs of pounds 80m this year in bidding for licences and buying into existing overseas projects after lifting its spending from pounds 15m to pounds 45m last year.

Gerry Whent, chairman, said yesterday that overseas start-up costs should peak this year if Vodafone was successful in all its bids and negotiations. The company would then have reached its target of an international presence equal to what it has in the UK.

Mr Whent was scathing about the competitive challenge from One-2-One, launched last autumn by Mercury and US West, but was more impressed by Orange, introduced by Hutchison Telecom in April.

He said that Orange appeared far more intelligent in its approach to the market and to prices than Mercury One-2-One. The latter, launched last year in London and the South-east, caused a furore by offering free off-peak local calls.

Vodafone has interests in mobile telephone networks in countries including Hong Kong, South Africa, Australia, France and Germany.

It plans to bid for licences to operate in the Netherlands, Belgium, Spain and Ireland and is considering stakes in existing mobile networks in four other countries.

News of the overseas expansion came with Vodafone's results, showing a 13 per cent increase in pre-tax profits to pounds 363.3m in the year to 31 March on turnover up 28 per cent to pounds 850.5m. The dividend is up by 20 per cent to 8.35p with a final of 4.23p.

Concerned at the size of start-up costs in as yet unproven overseas markets and the inclusion of a pounds 14m profit last year on disposals, the stock market gave the results a downbeat reception, lowering the shares by 4p to 518p.

The mobile phone market has been booming, fuelled by heavy promotional spending by newcomers and established operators as the economy pulled out of recession. Vodafone connected 335,000 subscribers, 40 per cent more than the previous year, and ended March with 1.17 million subscribers.

LowCall, Vodafone's cheaper- tariff product, brought in 150,000 new customers.

Chris Gent, chief executive of Vodafone, said that between January and April this year, mobile telephone companies took on 329,000 new subscribers, an increase of 142 per cent over the same period last year.

Vodafone's subscriber base is increasing by between 40,000 and 50,000 monthly and should reach 1.5 million by the end of this year.

Vodafone has just over half the total market but has been losing share. The company said that it had been focusing on maintaining its part of the higher-spending business sector.

Price-cutting and new tariff packages resulted in a fall in Vodafone's revenue per customer to pounds 665 in 1993-94 from pounds 710 two years earlier.

Mr Whent said that there would be no more price changes from the group this year and other mobile telephone companies would be forced to take a similar view.

'Orange and One-2-One dare not cut another penny or they will never see a profit,' he said.

Mr Whent said that he did not expect the revenue per customer to fall further as more people begin to use the digital mobile telephone service, offering better quality than the analogue network launched by Vodafone last year.

(Photograph omitted)

Bottom Line, page 29