Saturation slows sales growth at Vodafone

Vodafone New Zealand's mobile customer growth is slowing despite strong additions in its most recent quarter.

The New Zealand arm of the world's largest mobile company, based in Newbury, England, yesterday reported it added 68,000 new subscribers in the December quarter, bringing its customer base to 2 million.

But the additions were down from the same quarter last year, when 74,000 customers were signed up.

Business markets director Phil Patel attributed the year-over-year decline to a maturing market.

"We expected to see diminishing growth as far as new customers additions are concerned. That's just a natural part of the market evolution," he said.

"The real test of telecommunications companies going forward is going to be our ability to create new services and get customers using them."

The third-quarter additions were a significant improvement over the previous quarter, when only 27,000 new customers were signed up.

However, the yearly decline was somewhat surprising as the company has been touting its new third-generation (3G) service since August.

Patel said he was pleased with 3G uptake but would not specify how many of the new customers signed up for the service.

He said that all 68,000 additions were new and did not include existing customers switching over to 3G.

Patel said it was becoming harder to sign up new customers because mobile penetration in New Zealand was high, with about 88 per cent of people now owning one.

Industry observers agreed and said the natural point of saturation - where every adult has a mobile - was passed last year.

"As you move towards a saturated market, it becomes harder and harder to add new subscribers," said IDC telecommunications analyst Christopher Loh.

He said New Zealand would pass 100 per cent saturation - where users will own more than one mobile phone or device - in the next three years.

Vodafone New Zealand does not report financial results. But the company did report average revenue per user was up slightly, to an average of $51 a month over a three-month period, from $50.70 in the previous quarter. But that number was also down from $53 a year ago.

The company's British parent yesterday reported it added 8.3 million customers worldwide on the quarter, an increase of 4.9 per cent, to a total of 179.3 million.

It said yearly revenue growth would be "slightly lower" than the 6 to 9 per cent expected.

Vodafone New Zealand had for the previous four quarters lost market share to Telecom and sits at 54 per cent as of September 2005. Telecom reports its half-year results on February 2 and would not comment on customer additions. Analysts, however, expect strong additions from Telecom as well.

Vodafone would not comment on its plans for a home phone service, which came to light last week in a Commerce Commission filing.

Vodafone is seeking a ruling that would qualify its planned service as fixed-line, in which case it would be exempt from interconnection charges with Telecom.

It is understood that Vodafone could roll this service out quickly, but will likely be held back by interconnection challenges from Telecom.

Patel said the home-phone service was "a two-to-three-year strategy for us".

Loh said Telecom and TelstraClear would likely roll out similar services - involving fixed-line and mobile phone bundled packages - this year.