What's gone wrong at Vodafone?

By Steve Biddle, in , posted: 12-Jun-2006 20:43

So how could a company that once aspired to be the global leader in mobile get it all so wrong?

Under the leadership of Chris Gent Vodafone went shopping with the simple goal of being the biggest mobile operator in the world. They only wanted to be the biggest, they also wanted to be the best. When you thought of a mobile phone they wanted you to think of the bright red Vodafone logo. On their way they also happened upon the term "Vodafone Experience", effectively Vodafone wanted their customers to live, sleep and breath the Vodafone Experience. There simply would be no other mobile network that could offer you the warm fuzzies like Vodafone was going to do. Vodafone wanted to help design the phones, run the network and deliver you content on your phone through a walled garden WAP based experience known simply as Vodafone Live!

This dream of word dominance continued under Gent who didn't really see any reason why Vodafone couldn't have a presence in every market in the world because afterall that's what great companies do. The problem was that there were significant stumbling blocks that Vodafone either ignored, or didn't see. Because Vodafone had built itself primarily on acquisitions they had a huge mix of radio gear, billing systems and networks from numerous different vendors and trying to roll out products and services across this network was damn near impossible. Around 18 months ago somebody inside Vodafone finally

realised this and the "One Vodafone" concept was launched. Vodafone was now going to take advantage of the economies of scale that should be being achieved in a company of their size with the ultimate goal of outperforming their peers. There were going to be standardised plans for cellsites, core networks moved to IP, and network planning and purchasing that is nogotiated on a global scale removing much of the decision making from individual networks. Phones were going to be heavily customised (because the walled garden of Live! was believed to attract people to the network) and heavily marketed because significant numbers of customers already know what model of handset they want before they go shopping for a phone. So with this big plan how could it all go wrong for Vodafone? Chris Gent stood down after taking Vodafone from a small startup in the UK to become the dominant player in the mobile world. His replacement Arun Sarin has been unpopular since his appointment and there have been plenty of fights inside the Vodafone boardroom, the most famous of which was Gent resigning as honorary life president earlier this year due to his disagreement of the direction Sarin was taking. A few weeks ago they posted the biggest loss in European history of a whopping £14.9bn, primarily caused by writedowns of European networks that they paid far too much money for during the dotcom boom and excessive prices paid for 3G spectrum. While this loss is significant and Vodafone has £20bn in debt on it books things surely things can only be looking up for them, can't they? After all isn't the future of communications totally mobile?

Many people think so. Afterall, do you really need a landline phone if you have a mobile phone that can do exactly the same thing but is also portable? The big buzzword at the moment if you are a PSTN operator is convergence - being able to make your landline your mobile and your mobile your landline. However if you don't have a PSTN phone then why do you need convergence? Vodafone NZ's concept of having a local PSTN number for your mobile phone is a great idea and Telecom are so scared they currently won't let Vodafone launch the product due to a disagreement over the definition of "local call" termination. The fact Telecom are breaking their own rules every time a Telecom customer diverts their PSTN number to a

mobile phone seems to escape them. The problem is that there is currently a bottleneck when it comes to delivering internet access at broadband speeds using wireless. Telecom's EV-DO network kicks ass over Vodafone's WCDMA network and future upgrades for EV-DO are only going to enhance this offering. HSDPA and HSUPA are going to be a viable upgrade path for existing WCDMA operators but to be completely honest I'll believe HSDPA can handle 14.4 Mbit/s when I see it. Remember GPRS was always going to offer 144kbps? Yeah right..

People are now demanding broadband speeds for their internet access and in NZ at least Telecom are well

positioned to slam dunk Vodafone with their future upgrade path for EV-DO which turns it into an IP based mobile network combined with a core Next Generation Network that is once again IP based. Suddenly your one device does everything everywhere. The future of calling is VoIP and calls are going to be free. Period. Where does this leave Vodafone? Just as traditional telcos laughed at Skype a couple of years ago they have since realised that Skype is no laughing matter.

Vodafone's walled garden is suddenly going to haunt them as people realise that Vodafone simply can't give them the products & services they want at the price they want to pay. Google News delivered by WAP is amazing to use and best of all you're not stuck paying Live! prices. Vodafone need to realise that these days the mobile market is no different to any other FMCG product and that customers are a lot smarter than they were several years ago which really makes you wonder why it's still cheaper to head to many foriegn countries and roam on another GSM network because the prices are cheaper than roaming on a Vodafone network. People are disliking their heavily customised phones and in NZ at least Vodafone are simply being out marketed by Telecom where Kevin Kenrick has done to Vodafone what Vodafone spent many years doing to Telecom which is making them eat dirt.

Now back to Vodafone as a group. The talk over the past few days has been of a revolt against Sarin and several other board members by some large institutional shareholders. Whether or not this happens is anybody's guess but there can now be no disputing that their is turmoil at the top and that somebody or something has to break. There are some interesting times ahead..

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Why are airport taxes and service charges so high on Trans Tasman flights between New Zealand and Australia?
Flight reviews – Air New Zealand NZ87 Auckland (AKL) to Hong Kong (HKG) in Premium Economy and Air New Zealand NZ 80 Hong Kong (HKG) to Auckland (AKL) in Business Premier on the 777-200ER

Comment by paradoxsm, on 12-Jun-2006 20:58

EDGE would have been their saving grace,,,, but no,, the corporate jerks said "3G UMTS is faster" and god PISSED all over by their lesser Rival... EDGE is fantastic, but is like a dirt word to the Vodafone group. Let's see more rubbish like "you choose" forced contracts, XX.95c "confusion" marketing and stupid advertising and bad attitude from Vodafone and more stuff that undoes Grahame Maher's excellent work on turing Vodafone cool. And they wonder why they saw a record loss... I wonder...........

Comment by paradoxsm, on 12-Jun-2006 20:59

the word "God" should be "got"

Author's note by sbiddle, on 12-Jun-2006 21:12

Maher is very very well respected within Vodafone Group. I've love to see him as CEO in the future..Or at least saving NZ in his spare time, running Oskar can't take that much time! :-)

Comment by juha, on 12-Jun-2006 23:27

While you make some good points above, I think you probably overstate Telecom's speed advantage with EV-DO. If Telecom actually did something with it, like offering lots of EV-DO handsets and content and made the connection itself affordable to everyone then yes, Vodafone could grab its ankles and kiss its corporate butt goodbye here. However, converged phones and fast broadband aren't happening yet for everyone. Telecom might decide to get into that swing sometime late 2007, and Vodafone has a window of opportunity still. Don't forget that they have around two million customers in NZ... that's pretty formidable.

Comment by Carolyn, on 7-Apr-2007 18:08

Grahame Maher is an amazing man and not only turned Vodafone NZ around but also changed the lives of many people in VF Australia. Made profits, supported community programs and introduced a values based culture that removed hierarchies and empowered the people to provide 'unbeatable customer experiences'. What a legend! Maybe he needs to step up into Arun's position. Check out http://www.ceoforum.com.au/article-detail.cfm?cid=6197 to get a taste of his leadership style. There are not many MDs that would see hundreds of people in tears when he departed both NZ and Australia.

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Steve Biddle
New Zealand

I'm an engineer who loves building solutions to solve problems.

I also love sharing my views and analysis of the tech world on this blog, along with the odd story about aviation and the travel industry.

My interests and skillset include:

*VoIP (Voice over IP). I work with various brands of hardware and PBX's on a daily basis
  -Asterisk (incl PiaF, FreePBX, Elastix)

  -xDSL deployments

*Structured cabling
  -Home/office cabling
  -Phone & Data

*Computer networking
  -Mikrotik hardware
  -WAN/LAN solutions

*Wireless solutions
  -Motel/Hotel hotspot deployments
  -Outdoor wireless deployments, both small and large scale
  -Temporary wireless deployments
*CCTV solutions
  -Analogue and IP

I'm an #avgeek who loves to travel the world (preferably in seat 1A) and stay in nice hotels.

+My views do no represent my employer. I'm sure they'll be happy to give their own if you ask them.

You can contact me here or by email at stevenbiddle@gmail.com