Wednesday, 23 July 2008

Vodafone woes

I won't burden you with a repeat of Vodafone's results announced yesterday which sent their share price down 14%. You can read it all in the FT - Sarin bows out from Vodafone with a warning.

I will add, because it is not reported in the FT, that one of the really bright spots was the 50.6% increase in revenues from data services - from £441m in the 3 months to 30th June 07 to £664m in the latest period. It was Dongles whot done it - they showed an 84% rise. Although, before you get carried away, I will point out that even this is a mere 7% of Vodafone's total revenues.

It's interesting how the world moves on. Five years ago I was both an early adopter and fanatic for my Vodafone datacard in my laptop. Expensive as it was, I really don't know how I could have coped without it. But I've given it up now for several years. Mainly because I find my Blackberry much more convenient and secondly, when I do need to use my laptop, I've always been able to find a (usually free) WiFi Hotspot. Given part experience, I suspect that will be the trend for the 'mass adopters' that are now fuelling Vodafone's revenues. As they move onto smartphones (like the Apple iPhone) they too will abandon their dongles. The amount I paid to Vodafone for a Phone+Datacard was lot more than I now pay for my Blackberry - fuelling the problem that is behind the Vodafone warning.

To grow, any company has two choices - increase volume or increase ARPU. The best do both. Vodafone has hit saturation in volume (in the 'developed world' at least) and the current economic conditions means that everyone is looking at ways of reducing expenditure - not increasing it. This is quite well expounded in Tales of woe as consumers tighten their belts - again from today's FT.

I have expounded my Beer Syndrome theory many times on HotViews. If consumers stayed at home and consoled themselves with the equivalent of comfort eating or retail therapy on tech gadgets, then the worst fears of the economic downturn might be avoided. If Boys (and girls!) give up their Toys - God help us.

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