- Infrastructure sharing (reducing the costs of deploying mobile network infrastructure);
- Power and energy savings (introducing sustainable energy sources such as wind and solar power);
- Quality of services for data applications;
- Femtocells (powered booster box connected to a small antenna in order to enhance reception over a range up to 9 meters).
As a global organization, Vodafone embraces the differences that every employee brings to the Group, recognizing that a workforce which reflects the diversity of the customers it serves is better able to understand their expectations and more likely to have the skills and knowledge needed to deliver the innovative products and services that they want.
Vodafone endeavors to ensure that customers’ needs are at the core of all products and services. Understanding these needs and continuing to serve them is the key to Vodafone’s customer strategy. The Group seeks to use its understanding of customers to deliver relevance and value and communicate on an individual, household, community or business level. In delivering solutions that meet customers’ changing needs in a manner that is easy to access and is available when required, Vodafone aims to build a longer and deeper customer relationship.
It has continued to build brand value by delivering a superior, consistent and differentiated customer experience. Communication activities are focused on delivering the promise of “helping customers make the most of their time”. Vodafone offers voice, messaging, data and fixed broadband services through multiple solutions and supporting technologies to deliver on its total communications strategy, the Group’s vision being “to become the communications leader in an increasingly connected world”.
- Strategic Level Assessment
In terms of assessing quality on the strategic level, Vodafone’s Board and the Executive Committee use a number of key performance indicators (‘KPIs’) to acknowledge Group and regional performance against budgets and forecasts, as well as to measure progress against the Group’s strategic objectives.
Table 1: “Strategic Key Performance Indicators of Vodafone”
Vodafone holds the Research and Development department (consisted of an international team) responsible for the strategic objectives of the Group:
- contributing leading edge technical capabilities to Vodafone’s consumer offerings in the areas of internet, web and terminal platforms;
- identifying new and emerging business opportunities for fixed and mobile services;
- industry leadership in the development of future generation network technology through specification of standards.
Typically, Group R&D starts working on developments that are expected to be introduced into the business in three to five years, and leads them until a year or so before full commercialization. Currently the horizon covers some significant business developments that can already be anticipated. For example, Group R&D leads the introduction of wireless technology beyond 3G and is researching the next phase of the emergence of the internet as a personal communications platform – including radio technologies for accessing the internet in emerging markets.
According to their mission statement, Vodafone’s main goals is “to lead the industry in responding to public concerns regarding mobile phones, masts and health by demonstrating leading edge practices and encouraging others to follow”.
- Operational Level Assessment
Vodafone has been recently acknowledged by Reader’s Digest as being the most truthful brand in Romania on the mobile operators market and, furthermore, the company was recognized for its business value, innovation and ethics. According to a ranking published by Capital Magazine, in 2008 the corporation was the 10th most profitable enterprise in our country, with a turnover of €4,374,448,371 and a net profit of €1,128,555,797.
In order to monitor its performance against budgets and forecasts, Vodafone utilizes a number of key performance indicators, which are listed and defined in the table below.
Table 2: “Operational Key Performance Indicators of Vodafone”
In May 2009, Vodafone Romania announced its key performance indicators for the financial year 2008/2009, ended on March 31, 2009, as reported by Vodafone Group Plc.
The company registered 667,212 net additions for a total of 9,588,065 customers and, as compared to 2007/2008, Vodafone Romania increased its closing customer base by 7.5%. Postpaid customers accounted for 38.3%, incurring a 14.6% growth year on year, and prepaid for 61.7% of the corporation’s total customer base.
According to the same annual report, the service revenue increased by 1.4%, reaching a total of €1,113,000,000, while the total communication revenue ranged €1,166,000,000, representing an upturn of 0.7% as compared to the previous financial year.
Average revenue per user (ARPU) was € 9.85 for the year ending March 31, 2009, as compared to €10.76, at the end of March, 2008, corresponding to a decline of 8.5% year on year. A downturn was also recorded in Vodafone’s EBITDA, which reached a value of €527,000,000 and, weighted against the previous value of €546,000,000 it results in a 3.5% year on year decline. A rapid growth this financial year was encountered within the numbers of 3G devices in Vodafone Romania network, registering an increase of 78.3% and a total of 1,135,260 users.
According to the company’s CEO, Liliana Solomon, the financial results of the business reflect the direct impact of the Romanian economy challenges and the tight competition on the national mobile communication market. The lower purchasing power of consumers, caused by the devaluation of the local currency, has led to a general drop of the consumption in this field and, consequently, Vodafone seeks to support its clients through these difficult times by offering affordable services and cost efficient packages. Moreover, the corporation will continue to focus on cost control and operational efficiency, encouraged by the positive effects of the programs run within the company which succeeded in maintaining an almost constant EBITDA margin, year on year, despite the adverse economic and market conditions.
- Future Prospects
In Europe and Central Europe, operating conditions will be challenging in the 2010 financial year. IMF forecasts indicate a GDP decline of 4% in 2009 across the Vodafone footprint within Europe and Central Europe and that unemployment could increase significantly. In these markets, Vodafone expects that voice and messaging revenue trends will continue as a result of ongoing pricing pressures and slowing usage. However, it is expected further growth in data revenue. In Turkey, where the company will focus on their turnaround plan, it is expected that the 2010 financial year will be challenging. Revenue growth in other emerging markets, in particular India and Africa, is expected to continue as Vodafone drives penetration in these markets. They expect another year of good performance at Verizon Wireless.
Adjusted operating profit is expected to be in the range of £11.0 billion to £11.8 billion. Vodafone has widened their outlook for adjusted operating profit this year to reflect current economic uncertainty. Performance will be determined by actual economic trends, the company success in closing the performance gaps they have identified in certain markets and the extent to which they decide to reinvest cost savings into total communications growth opportunities. Underlying EBITDA margins, before the impact of acquisitions and disposals, foreign exchange and business mix, are expected to decline by a similar amount to the 2009 financial year. This trend reflects the benefit of the acceleration of the Group’s cost savings programme in a weaker revenue environment. Overall Group EBITDA margin is expected to decline at a slightly slower rate.
Free cash flow before license and spectrum payments is expected to be in the range of £6.0 billion to £6.5 billion, ahead of company’s medium term target to deliver between £5.0 and £6.0 billion annual free cash flow. Vodafone intends to maintain European capital intensity at around 10% of revenue and to continue to invest significantly in India. Capital expenditure is expected to be similar to last year after adjusting for foreign currency.
Vodafone’s strategy is focused on improving operational execution and pursuing growth opportunities in total telecommunications services, while delivering strong free cash flow.
Although revenue from traditional services of voice and messaging in mature markets is growing more slowly due to competitive and regulatory pressures, there remains a significant growth opportunity in mobile data. There are also growth opportunities in enterprise and broadband markets due to increasing demand for integrated solutions, international services and converged offerings.
Within the Vodafone footprint, emerging markets, such as India, continue to exhibit the potential for strong growth due to low mobile penetration rates of around 38% on average, compared to over 120% in Europe, which together with higher GDP growth prospects, provide a significant customer growth opportunity.
In light of the changing environment the Group revised its May 2006 strategy. The new key target is to focus on driving free cash flow generation. This target is supported by four main objectives: drive operational performance, pursue growth opportunities in total communications, execute in emerging markets and strengthen capital discipline.
Regarding growth opportunities, the three target areas are mobile data, enterprise and broadband. Vodafone has already made significant progress on mobile data, with annual revenue of £3 billion, 26% higher on an organic basis than that of a year ago, but the opportunity remains significant as the proportion of the customer base that regularly uses data services is only around 10% in Europe. In the enterprise segment, Vodafone has a strong position in core mobile services, mainly amongst larger corporations. The aim is to build upon this position and expand into the broader communications market, serving small and medium sized businesses with converged fixed and mobile products and services and to continue to increase the Group’s penetration of multinational accounts. In fixed broadband, the Group has a presence in all of its European markets and 4.6 million customers globally.
Vodafone continues to adopt a market by market approach focused on the service, rather than the technology, and targeted at enterprise and high value consumers as a priority.
Vodafone is already represented in a number of attractive emerging markets. The Group’s principal focus is now on execution in these markets, particularly in India, Turkey and the existing African footprint, following the acquisition of a controlling interest in Vodacom based in South Africa. Where possible, Vodafone will also seek to maximize the mobile data opportunity. While new markets are of interest, Vodafone will be cautious and selective on future expansion. The primary focus will remain on driving results from the existing footprint.
The Group is focused on generating £5 billion to £6 billion of free cash flow per annum, excluding licence and spectrum and any potential CFC tax settlement. In terms of cash deployment, the priority is to invest in existing businesses, expand in the growth areas of mobile data, enterprise and broadband and acquire, where appropriate, new spectrum to support voice and data traffic growth.
Beyond this, the Group will aim to enhance returns to shareholders, primarily by increasing dividends. In November 2008, the Board adopted a progressive dividend policy where dividend growth reflects the underlying trading and cash performance of the Group. The Group remains committed to the current low single A long term average credit rating.
After investing in existing business and returns to shareholders, the Group will consider opportunities to reshape the portfolio. In emerging markets, the focus is on execution rather than expansion. In addition, the Group’s current capital structure implies that any significant acquisition would likely need to be funded through portfolio disposals. Vodafone supports in-market consolidation, such as the recent agreement to merge the Australian assets of Vodafone and Hutchison 3G Australia to form a 50:50 joint venture.
- Analysis and Conclusions
“Welcome to Vodafone! How can we help you?” It’s what the kind voice tells you when you call Customer Service. They help you in every way they can and give the best possible solution to your problem and answer to your question.
In our personal view, Vodafone is one of the companies that have truly understood the purpose of making business and how to achieve it. They show that they know that what’s best for the customer it’s even better for the company and its numbers, and the fact is shown by the excellent feedback the corporation receives on the forum and in its suggestion box.
Only 20 years old, the Group is now worldwide expanded, which is an amazing achievement. Sustained by the continual developing technology, Vodafone has made its way to reaching its old stated vision of becoming the world leader. Furthermore, the company has succeeded in keeping up with the technological developments and even being one step ahead of the competition. Nevertheless, the key success factor is, in our view, the ability of self-assessment on every single level, strategic, financial and operational treated as most important.
Another area of great attainment is Vodafone’s Corporate Social Responsibility department. The Group does not treat corporate responsibility as a gesture or add-on - it is part of its core business and helps it accomplish sustainable business success. The company’s approach to CR is to engage with stakeholders to understand their expectations on the issues most important to them, and to respond with programmes and targets, and to communicate regularly and transparently on progress.
Essentially, Vodafone cannot be judged for any wrong decision or approach. As overestimated or glorified as it might sound, it’s the perfect company from any angle you look at it, and it serves as a perfect example and role-model for any new-born company in the telecommunication industry or any other.
- References
