Vodafone's customer call cut short

Vodafone Group's ebitda rose to 14.7 billion as it cut costs to counter sliding prices and sluggish demand. Photo / Supplied

Despite Vodafone claiming a "huge" customer gain in the wake of Telecom's XT woes, the company ended up with only 2000 more connections in the year to March 31.

During the first three months of this year Vodafone hooked up 11,000 new customers during a period in which Telecom lost 19,000 connections.

But numbers released as part of the global Vodafone Group's annual results show Vodafone New Zealand had a volatile 12 months, gaining and losing customers to end up 2000 connections - or 0.08 per cent - ahead of where it was in March last year.

Telecom gained 39,000 connections - 1.73 per cent - over the same period, according to Telecom's figures.

Goldman Sachs JBWere analyst Tristan Joll said the quarterly numbers out of Vodafone "certainly weren't overwhelming" and reflected the competitive mobile market.

Joll said the 11,000 gained in the most recent quarter was made up of a rise of 16,000 contracted customers and a drop-off of 5000 pre-pay customers.

Last year new entrant 2degrees joined Telecom and Vodafone as a mobile network operator and said in February it had connected over 200,000 customers in the six months since its launch.

Customers drawn to the 2degrees offer are more likely to be pre-pay customers unimpeded by contracts, with those connected to Vodafone able to move without changing handsets.

Joll said the first three months after Christmas were traditionally quiet, particular for pre-pay sales.

"It's a combination of a quarter that is not usually strong, tough economic times meaning the market is not growing strongly, but then more importantly, even though they are benefiting to some extent from the Telecom outages they're clearly under pressure at the low end from 2degrees," said Joll.

The same quarter had also seen Telecom gain 5000 contract customers - many on temporary CDMA connections to cover the XT outages - but lose low-value pre-pay customers at a faster rate.

More than two-thirds of Vodafone customers are on pre-pay phones, although the percentage is dropping. Less than half of Telecom's XT customers are on pre-pay connections.

At its annual results briefing Vodafone New Zealand's parent, Vodafone Group, said it would increase dividend payments after a 1.7 per cent rise in full-year operating profit on job cuts and higher emerging markets sales.

The company targets an annual dividend per share growth of no less than 7 per cent for the next three financial years, Vodafone said.

In the 12 months ended March, earnings before interest, taxes, depreciation and amortisation rose to £14.7 billion ($30.5 billion) from £14.5 billion. Analysts had estimated ebitda of £14.8 billion.

"Improved revenues, better cash flow and higher dividends are the key positives," Mandeep Singh, an analyst at Berenberg Bank in London, said.

Vodafone Group, the world's largest mobile-phone company, and its rivals have been reducing expenses to counter a slide in prices and sluggish demand for telecommunications services in some markets.

Vodafone Group in November doubled its cost-savings target to £2 billion by 2012.

"Cost reduction targets were delivered ahead of schedule," Vodafone chief executive Vittorio Colao said.

"We are creating a stronger Vodafone, which is positioned to return to revenue growth during the 2011 financial year."

The England-based company has expanded into emerging markets in the past four years to bolster growth with acquisitions in countries including Turkey, India, South Africa and Ghana.

NZ MOBILE CONNECTIONS

Vodafone
* At March 31, 2010 - 2.504m
* At March 31, 2009 - 2.502m
* Growth - 0.08 per cent

Telecom
* At March 31, 2010 - 2.291m
* At March 31, 2009 - 2.252m
* Growth - 1.73 per cent

2degrees
* At March 31, 2010 - n/a
* At March 31, 2009 - 206,000 (February 12, 2010)
* Growth - n/a

Sources: Vodafone, Telecom, 2degrees

- additional reporting by BLOOMBERG