Vodafone Misses The Writing On The Wall

Vodafone today reported decent half-year profits, but its shares got punished after it gave a dismal outlook on growth going forward, citing increased penetration and competition in European markets, as well as ongoing troubles in Japan. As is being pointed out, none of these are new developments: Vodafone’s floundering in Japan has been going on for years, European mobile penetration didn’t just take a giant leap this month, quarter or even year, and the likes of Vodafone have been relatively oblivious to the disruption going on in the voice telephony business. Convergence products are becoming increasingly attractive, combining the convenience of mobile with the low cost of fixed calls, and it looks like Vodafone is being slow to catch on. In Germany, it’s introduced a mobile-only program that gives users cheap calls in a 2km zone around their house, but its efforts to innovate business models don’t seem to have moved out of that country yet. What’s the solution? Build more expensive networks, apparently, according to the CEO. The telephony business is changing radically, and the (ever-diminishing) premium price for mobile service is under increasing attack from a variety of players offering less convenient, but drastically cheaper options. The solution for mobile operators isn’t to build a new network; it’s to innovate their products and pricing to offer the right services at the right value.

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