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Vodafone bets its future on customer cull

Vodafone's recent rough ride and plunging user numbers are set to continue, as accounting changes will take their toll.

Vodafone's recent rough ride and plunging user numbers are set to continue, as accounting changes will take their toll.

The network expects large customer losses to continue into the second half of the year because of a change in the way it accounts for customers, which it says will give it the cleanest books in the telecoms industry in Australia.

"[Customer losses] is what you would normally expect. We're still recovering from a perception issue from a couple of years ago and we're also doing the accounting clean-ups," Vodafone Australia chief executive Bill Morrow said.

He said Vodafone was amending its books to get rid of non-tolling customers, when existing customers were given a new SIM card in the hope that they would use both, thereby adding "new" customers.

"The reality is many of those, and I'm talking a large number, never really incurred any toll charges whatsoever. So we just went back and cleaned all of them up and removed those, so those are going to show up in the second half of the year," he said.

But cleaning the customer books would not affect the financial result.

Industry analysts praised Vodafone's decision of getting rid of inactive users. BBY telco analyst Mark McDonnell said: "I applaud efforts by carriers to clean up books and give us better reflection on who they really have as current and repeat customers."

He said there was no standard industry definition on "non-tolling or inactive customers" and "one usage can constitute as active in a month and it is very rubbery".

It is the standard practice for the telco industry to count each SIM card as a customer and the number of customers on their books is larger than Australia's population.

Mr McDonnell said the number of SIMs was expected to increase dramatically as more people owned multiple devices and with the spread of machine-to-machine devices such as smart meters with "low-value transactions".

Further customer losses would come from the closure of the Three and Crazy John services.

In the six months to June 30, 2013, Vodafone's total customer base fell by 551,000 to 6.028 million. It has 800,000 4G devices since it launched its super-fast 4G network in June this year.

It claims to have the fastest 4G speed compared with Telstra and Optus.

Mr Morrow said he was confident customer numbers would become positive next year.

Vodafone has been scarred by the backlash of customers angry over its poor coverage, slower speeds and high dropout rate, which reached its peak in 2010-11. There were threats of a class-action lawsuit from more than 23,000 customers.

Mr Morrow, praised for his work in Vodafone's operations in Europe and Japan, was brought in to help revive Australia's No. 3 telco in March 2012.

He says Vodafone has improved its network coverage by 40 per cent, doubled its speeds and its dropout rates are also down.

"We've just kicked off one of the largest ever outdoor ad campaigns in the history of our existence to start to convey this as a new Vodafone," he said.

While optimistic for the future, Mr Morrow said Vodafone was setting itself realistic goals.

"We don't target becoming a market leader quick - frankly we just want to earn the respect back."

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