Vodafone's revenue fall no surprise
challenging economic environment in its core market. Sadly, this is to be expected.
Ovum’s research has shown that telecoms is a lagging indicator to the economy. Accordingly, given Europe’s economic woes in 2012, we expect telcos that rely on Europe for the majority of their revenues to struggle. Customers feel the pinch in their pockets before they reduce their telecoms spend.
The challenge for Vodafone and other European operators is to stabilize their performance and ensure that their share of the customer's wallet holds firm.
For Vodafone in particular, Ovum warned in 2009 that its emerging market operations must not be relied on to perpetually offset poor performance at home. This has proved to be a prescient warning. Growth in its emerging markets operations has slowed and Vodafone is now relying on Verizon Wireless. It is to Vodafone's credit that its management fended off pressure to sell the Verizon stake in the past.
But there is hope for Vodafone. Opportunities exist for telcos to play a bigger role in the “connected future”. Better pricing design can also unlock additional value, and telcos should look to become active enablers of the digital society.
In doing this, Vodafone must get the balance right between investment and profitability. And this is where European regulatory authorities should help by not imposing huge burdens on them.
Emeka Obiodu is a principal analyst at Ovum. For more information, visit www.ovum.com/