Watching the Vodafone quarterly results Webcast this week, a few things fell into place for me. The announcement that Vodafone was to scrap roaming charges in some countries for three months started to make more sense.
Initially, I thought including roaming calls in ordinary bundled minutes was a smart reaction to regulators’ complaints about the cost of international calling. However, I’m less sure of that now. I think there’s more to it.
Vodafone is relaunching and repositioning itself in the UK, and this promotion is an important part of that. During the Webcast on Tuesday, Vittorio Colao, Vodafone’s CEO said he’s concerned that the company is perceived as a premium brand in the UK. He’s keen that subscribers understand Vodafone can offer value for money in these cost-conscious times. A temporary removal of roaming charges fits neatly in with the strategy he outlined last November, which replaces “revenue creation” with “value creation”. As part of this strategy, Colao asserted that subscriber loyalty was the quid pro quo for giving customers more minutes, texts and megabytes of data for less money.
Our research shows O2 has outperformed Vodafone in its home market on almost every significant indicator of success for the past 18 months. This must have worried the group, but the UK has received less attention than it should have, partly because problems in Turkey and Spain have kept the operator busy.
But Vodafone’s starting to implement changes. It’s fired up several campaigns to reassert its competitiveness in the UK market. Just a few weeks ago it announced a flat rate of £0.50 a day for mobile Web browsing. It has also launched the prepaid Freedom tariff, which boasts £50 of credit for just £10.
These offers are limited to the UK, and some of them are scheduled to end in September. Vodafone might be looking to gauge the success of its roaming promotion and extend it to other territories, or indeed do away with roaming charges for good.
I’ve long expected a return to competitiveness from Vodafone; my only surprise has been how long it’s taken in its home market. Vodafone now looks like it has the tariffs and promotions to lure customers away from its biggest rival, O2, but it needs to convince people the deals are part of something new not just summer offers. That may take a long time.
It would be natural to see other network operators taking a stand and trying to provide similar services to Vodafone. The UK has five large network operators all fighting for business and trying to remain competitive. If Vodafone can maintain a concerted push for customers, it’s likely it’ll grab back much of the ground it lost in 2008 and 2009, particularly to its main rivals, O2 and Orange.
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