MOBILE network provider, Vodafone, has released its 2009 year review where it expressed a pessimistic outlook for the year.
The company, which owns a major stake in South Africa’s Vodacom, said under the current economic recession, it would devise further cost-cutting measures to maintain profitability.
“As part of its strategy, the Group will continue to offer new services to its existing customers and seek to increase non-voice service revenue as a percentage of total service revenue. However, the Group may not be able to introduce these new services commercially, or may experience significant delays due to problems such as the availability of new mobile handsets, higher than anticipated prices of new handsets or availability of new content services. In addition, even if these services are introduced in accordance with expected time schedules, there is no assurance that revenue from such services will increase ARPU or maintain profit margins,” said Vodafone secretary Steven Scott in the review.
He forecast a decline in its market share.
“The Group faces intensifying competition and its ability to compete effectively will depend on, among other things, network quality, capacity and coverage, the pricing of services and equipment, the quality of customer service, development of new and enhanced products and services, the reach and quality of sales and distribution channels and capital resources. Competition could lead to a reduction in the rate at which the Group adds new customers, a decrease in the size of the Group’s market share and a decline in the Group’s ARPU as customers choose to receive telecommunications services, or other competing services, from other providers. Examples include, but are not limited to, competition from internet based services and MVNOs.”
Scott said expected benefits from cost reduction initiatives may not be realized.
“The Group has entered into several cost reduction initiatives principally relating to network sharing, the outsourcing of IT application, development and maintenance, data centre consolidation, supply chain management and a business transformation programme to implement a single, integrated operating model using one ERP system. However, there is no assurance that the full extent of the anticipated benefits will be realized in the timeline envisaged,” Scott added.
He said expected benefits from investment in networks, licenses and new technology may also not be realized.
“There can be no assurance that the introduction of new services will proceed according to anticipated schedules or that the level of demand for new services will justify the cost of setting up and providing new services. Failure or a delay in the completion of networks and the launch of new services, or increases in the associated costs, could have a material adverse effect on the Group’s operations. The Group’s business and its ability to retain customers and attract new customers may be impaired by actual or perceived health risks associated with the transmission of radio waves from mobile telephones, transmitters and associated equipment.”
The company also warned of negative returns in emerging markets saying political and economic upheavals in those markets were not of their own doing.
“Political, economic and legal systems in emerging markets historically are less predictable than in countries with more developed institutional structures. As the Group increasingly enters into emerging markets, the value of the Group’s investments may be adversely affected by political, economic and legal developments which are beyond the Group’s control,” said Scott.
Mthulisi Sibanda
