Vodafone's battle against 'Vodafail'

Australia's third biggest mobile operator Vodafone Hutchinson Australia is still bleeding money and customers and one look at the recent results of its UK parent Vodafone shows you that when it comes to revenue the Australian unit is performing well below expectations.

The operator is now facing the task of not only rehabilitating its network but more importantly win back the trust of customers. Something that's easier said than done.

 Here is an extraordinary slide of revenue by jurisdiction from the last Vodafone conference call. The numbers from Australia are abysmal to say the least. 

Revenue is great in growing emerging markets (Turkey has become a land of smartphones) and it's bad in Italy, Portugal, Greece and Spain. The biggest driver there is mobile termination rates - these are markets where you pay to make a call to a mobile phone and these calls are discretionary.

The shocker though is Australia - and it has been a shocker for a while. Revenue performance in Australia is worse than any Southern European country.

This was entirely predictable.

In Australia "3" merged with Vodafone and network performance was abysmal. This video went up on YouTube a little over a year ago parodying the (combined) company.


 

That video has roughly 200 thousand views - or 1 per cent of the Australian population. These companies spent a lot of money on advertising and sports sponsorship: all wasted because of high credibility parodies and word of mouth. The results speak for themselves as this article demonstrates:

Hutchison Telecoms Australia, 50 per cent stakeholder in Vodafone Hutchison Australia (VHA), announced yesterday afternoon that VHA lost 178,000 customers and reported a loss of AU$260.2 million for the first six month of 2012. 

In what has been a disastrous 18 months for the company, following its infamous network outages in 2011, Vodafone's customer base slid below 7 million to 6.8 million, from a high of 7.5 million in 2010.

Note the scale of this stuff-up. The population of Australia is 22.6 million and there are roughly the same number of mobile phones. They lost 700 thousand customers or three per cent of the population. [This is in a business where a one per cent movement is a big change in share...]

My guess, in terms of lost customers and future profits the stuff up will wind up being worth something like a billion dollars.

And it takes a special customer-service incompetence to get this bad. One disgruntled customer who wanted to be let out of their contract because the service did not work wound up setting up a website (vodafail.com) to let customers grieve. Eventually Vodafone did let the victim out of its contract - but when it takes a successful social media campaign to get the company to do the right thing there is something deeply wrong with management. For the record, Vodafail did not meet its part of the obligation - it did not deliver a phone service...

The #vodafail tag is still active in Twitter as the following shows:

Yes - the company still converts iPhones to iPods and can take half an hour to update twitter. This problem is not yet solved.

But to be fair it is nowhere near as bad as during 2011 - and the frequency of tweets with the #vodafail tag is declining. Moreover the Vodafail website has gone (relatively) quiet noting that:

More recently, traffic to Vodafail.com has declined significantly. Having achieved the goal of raising awareness and promoting concrete action in early 2011, we have now reached the point of closing Vodafail to new complaints. The site will remain online for as long as possible as a reminder and an example of what is possible when we share our experiences. 

This was an execution stuff-up of the first order. And it took until March 2012 for them to parachute in a new CEO (Bill Morrow) who has (rightly) declared that his task is network, network, network and network...

But he also has to get back trust - especially in a business that asks people to sign 24 month contracts and then won't let them out when they can't meet itsend of the contract  (its end being to make your phone work). He has made a start - allowing a 30 day let-out clause: Here are the terms:

We're confident you'll be happy with our new network, so now we guarantee it.

Upgrade on a new Postpaid Mobile or Mobile Broadband Modem service and if you're not happy with your network experience you can cancel your contract within the first 30 days. No cancellation fees, just pay for what you've used, until cancellation is finalised¹.

We're investing $1 billion on rolling out a new Vodafone network to give you:

• Stronger signals
• Faster downloads
• Better indoor coverage

Than ever before from Vodafone. Find out more Vodafone.com.au/network 

Trust is a special thing in business and I don't envy Bill Morrow his job. But I also wonder why it took 12 months after Vodafail was the centre of musical parody to actually change the CEO. Surely there are enough network-technical-junkies in Vodafone who would like a six month emergency working gig in Australia to get the network fixed up.

The whole thing petrifies me because I own Vodafone stock (despite this problem) and they are doing a much bigger integration in the UK where they are merging with Cable and Wireless. Stuffing that one up would matter much more than my little local market. 

This post was first published on Bronte Capital, Republished with permission.