Vodafone toughs it out to add seven million customers

Vodafone has announced its key performance indicators (KPIs) for the third financial quarter, showing the company is on track to meet its guidance but is struggling to grow in the UK.

The quarter, traditionally a lucrative one for operators as it covers the Christmas period, saw Vodafone add more than seven million new customers, bringing its total subscriber base to around 180 million worldwide.

In the UK, however, the mobile giant added just 561,000 - noticeably less than O2, which announced its KPIs yesterday, managed in the same quarter. The vast majority - 84 per cent - of Vodafone's new additions are the traditionally less lucrative pre-pay customers.

Vodafone described the UK market as "highly competitive", citing pressure from traditional operators and MVNOs, as well as Christmas special offers as contributing factors to the tough climate.

Service revenue grew by just over two per cent, with ARPU falling by more than four per cent year-on-year. O2 also announced it had experienced a slight downturn in its ARPU, with customers spending an average of £3 less year-on-year.

Having spent more than £5bn on a 3G licence, Vodafone is finally seeing some take-up amongst users. According to the operator, there are now more than eight million 3G phone and data card users, around 800,000 of whom are in the UK.

However, even 3G take-up has its downside for operators. With third generation phones costing slightly more than their 2G equivalent, operators, who subsidise the phones, are finding each new customer acquisition or upgrade costs them more.

Vodafone's performance has been stable but unimpressive across its major markets.

Julian Hewett, analyst at Ovum, said in a research note: "No surprises in these KPIs. But overall, they signal that Vodafone is no more than a middle-of-the-road performer in its main European markets. There's no sign yet of any performance improvement resulting from either 'One Vodafone' - ie exploiting its global footprint - or the fact that it is driving 3G harder than its major competitors in Europe.

"As we have suggested before, the overheads of global co-ordination often seem to get in the way of local nimbleness and execution."