Vodafone UK's alternative approach to the sale of LTE services finally appears to be showing signs of success, according to a new research report from CCS Insight.
From the start, Vodafone UK's strategy has been to offer inclusive content with access to its LTE network at premium prices, bundling in services including Sky Sports, Spotify and Netflix in the belief that customers would want more than just faster speeds to be persuaded to upgrade.
Now, that approach seems to paying off, the research company noted. Although Vodafone still had only 3 million customers on its LTE network by the end of March 2015--equivalent to 14 per cent of the market and well below the 10 million customers reported by EE--CCS Insight noted that it is very likely to have the highest-value customers. Furthermore, evidence shows that offering inclusive content drives uptake of other applications and service and helps reduce churn.
"Over the past 12 months, the company reported an impressive 4.5 per cent increase in revenue from post-paid consumer subscribers. This pushed overall service revenue growth into positive territory for a second consecutive quarter," the analysts noted.
In contrast, EE has yet to see significant benefit from LTE in its financial results, even though the company now has the largest number of LTE subscribers in Europe. Its operating revenue dipped by 1.1 per cent year-on year to £1.4 billion (€2 billion/$2.2 billion) in the first quarter of 2015, and average revenue per user (ARPU) among mobile customers fell 0.5 per cent to £18.60.
"Indeed, [Vodafone CEO Vittorio] Colao appeared to take a swipe at EE's success in LTE, saying that it was very easy to 'buy growth' but that he believes increasing ARPU through enriched price plans was the best long-term approach," CCS Insight said.
In contrast, disruptive providers such as Tesco Mobile and Three UK offer LTE at no additional premium, and have also forced O2 UK and EE to lower prices sooner than they might have expected, the analysts added.
"Vodafone has steadfastly retained its premium strategy and refused to become embroiled in a potential race to the bottom," CCS Insight said.
Indeed, Vodafone has typically pursued a premium approach to LTE across its European footprint, focusing on inclusive content rather than low prices under the Vodafone Red strategy.
On its domestic market, the company nonetheless faces considerable challenges ahead: CCS Insight said Vodafone UK now needs to increase LTE population coverage beyond the current 63 per cent, while shortcomings remain in its customer service.
The company is also weeks away from the launch of a consumer broadband service in the UK, a move that will position it more firmly in the multi-play market and enable it to compete head-on with BT, Virgin Media and TalkTalk. Vodafone Group is also the subject of ongoing speculation about a potential tie-up with Virgin Media's parent company Liberty Global.
"Clearly, the next few months are going to be crucial if Vodafone is to turn around its fortunes in the UK," CCS Insight concluded.
For more:
- see the CCS Insight research report (sub. req.)
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