Vodafone chief plays down operator storm

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Vodafone UK chief Guy Laurence puts the difficulties faced by UK operators in some perspective, and rejects the notion a storm is brewing with the twin requirement to reverse falling airtime revenues and stump up for new spectrum licences and infrastructure

Vodafone UK chief executive Guy Laurence said last week the mounting pressure on UK operators to reverse falling revenues in the face of imminent investment requirement in spectrum licences and network infrastructure could be too easily exaggerated.

Laurence remarked: “Recession is pushing down profits and saturation in the market means growth in the traditional way is hard to come by. But most businesses in most other market places face the same issues. It is not really that different to, say, Tesco or Mothercare, or anyone else.

“The exceptions are the regulatory impact on this market, which to be fair is a factor in the energy and pharmaceutical sectors also, and the the licence cost, which is why fair rules for the auction of spectrum (see page 36) and an appropriate fee are important.”

Vodafone posted positive revenue growth, of 0.7 per cent, for the first time in more than a year in the three months to June 30. But profits for the sector peaked four-and-a-half years ago, and have been in steady decline since. Vodafone’s books have been hit.

The impact of Ofcom regulation to slash mobile termination rates in degrees by almost 90 per cent within the next five years, and of European legislation on roaming rates has hit large incumbent operators hard. Market saturation has made acquisition of new customers an increasingly skilled occupation.

At the same time, the UK coalition government, saddled with the largest budget deficit in the modern era, has instructed Ofcom to hurry with auction of 800MHz and 2.6GHz spectrum in 2011, stretching UK operators further.

Given the parlous state of the UK economy and recent money-spinning auctions in India and Germany – where 700 billion rupees (£10.5bn) and €4.4 billion (£3.67bn) was raised in the sale of spectrum for 3G and 4G usage, respectively – there is real concern among operators.

But Laurence played it down. “I would suggest it sharpens the mind.

“It’s not such a storm the boat will tip over. To me, it creates a healthy discipline within the organisation – for striking that balance between shorter term and longer term objectives.”

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