Swot Analysis of Vodafone

Vodafone significantly enhanced its presence in the enterprise market and Cable & Wireless’ acquisition has been a strong catalyst. The group’s enterprise customers range from small-office-home-office (SoHo) businesses and small-to medium-sized enterprises (SME), through to large domestic and multi-national corporates (MNC). Vodafone caters to about 30 million mobile enterprise customers accounting for around 8% of all customers and around 23% of service revenue. Enterprises spend E86 billion ($118.5 billion) in total in areas where Vodafone provides its services which include mobile voice, messaging and data.

The group aims at using its expertise in converged services to connect businesses. Vodafone’s geographic footprint in Europe allows it to enhance efficiency and realize scale benefits, allowing it to offer customers both fixed and mobile converged solutions. The group’s Vodafone One Net proposition offers customers one number which can be answered on their desk phone or mobile phone and this forms the base of Vodafone’s unified communications strategy. Further, about 40% of the group’s enterprise customers have a smartphone or tablet across Europe, pushing enterprise data revenue growth of 18.

For example, only 74% of India’s 1.2 billion population have a mobile phone implying good potential future market growth. According to industry estimates by 2015, there will be 1.5 billion new mobile users, and the vast majority will be from emerging markets.

Emerging markets represent around 29% of Vodafone’s service revenue and the share is likely to grow over the medium to longer term driven by continued strong economic growth and the increase in mobile penetration towards mature market levels. Further, Vodafone has been steadily increasing its exposure to emerging markets given the stronger growth prospects that they offer relative to developed markets.The group operates mobile networks in a number of emerging markets including India, Vodacom, Egypt, Turkey, Ghana, Qatar and Fiji and in all of these markets, the group holds either a number one or two revenue market share position.

Threats Euro crisis will have an adverse impact Euro area continues to witness slow growth environment. The businesses and consumers are adjusting spending to this slow growth scenarios and this is impacting the growth prospects in this region. The estimates indicate that the Euro area is likely to be pressurized for another couple of years. Vodafone witnessed decline in organic service revenue in Europe which was down 1.1% year-on-year, in FY2012.

Competition The telecommunications industry is highly competitive, with typically at least four national mobile network operators, such as Vodafone, and one national fixed line operator in each country. In addition, there can be numerous companies that rent capacity from mobile operators and sell their own mobile services to customers. In some countries there can also be several independent distribution companies that compete with the mobile network operators’ own stores. Advances in technology are bringing in newer suppliers, such as internet based companies and software providers offering converged services such as voice over internet protocol (VoIP). Against this background, consumers have a wide choice of providers.

Unfortunately, almost all of the incremental ARPU the group is generating ends up being invested in commercial costs. The smartphone market is still skewed to the high end, which has driven significant increases in average customers acquisition and retention costs over recent years. Looking ahead, Vodafone expects more competition in the handset market as new vendors seek to enter the market and more established players look to grow in the mid-tier. This should drive down the group’s customer investment costs. However, the pressure on top line, particularly in Europe, is intense and the group needs to protect profitability through better cost discipline. Commercial costs are the biggest single cost in telecommunications business and the group will have difficulty stabilizing margins unless it manages these acquisition and retention costs more rigorously. Intense competition restricts the group’s ability to control these costs.

Matured European mobile markets may negatively impact future growth prospects The European markets, where the group has significant presence and generates considerable revenues, have high penetration rates. In FY2012, Germany, the group’s largest geographic market, accounted for 17.8% of the total geographic revenues. Also, Vodafone generated approximately 69.1% of its total revenues from European countries in FY2012. Most of these countries have penetration rates higher than 100%. The high penetrations in these markets indicate saturation, eliminating any chance of significant growth in the future through new subscribers. The high penetration rates in these markets signify weak prospects for the group to report growth, making it dependent on differentiation and value added services for future growth. Mature European mobile markets may impact Vodafone’s mobile revenue growth and profitability in coming years.