Vodafone releases key indicators – doubts grow

Market on tenterhooks

ComputerWire: IT Industry Intelligence

Vodafone Plc will release its key performance indicators today as belief in the growth prospects of the world's largest mobile operator is crumbling and its share price is poised to crash through the psychologically important 100 pence barrier.

In common with other European operators, it is expected to report a slowdown in the growth of subscribers, but nervousness about the company has increased with reports that it lost subscribers in Germany, Europe's largest market, after rebranding the D2 operations that it acquired with its takeover in 2000 of Mannesmann AG with its own name.

There had been general support in financial circles for Vodafone's ambitions, but the minority who questioned the company's prospects received enormous support when Japanese bank Nomura did a huge U-turn last week and, from setting a target price of 160 pence for the stock and a "buy" recommendation, now say that the shares are worth just 77 pence and should therefore be sold.

Nomura said that over the next six months, concerns on subscriber growth and ARPU levels are unlikely to be alleviated by today's key performance indicators or the full year's figures on May 28. It said that as the 2G mobile sector matures, the premium commanded by Vodafone and many of its mobile peers over the integrated telco sector looks increasingly unwarranted.

After three-quarters of static ARPU figures from Vodafone, it says that there are few additional services or drivers on the immediate horizon that are likely to convince consumers to spend more on their phones. Spending on mobile telephony has been around 2% of GDP per capita for some time, and although new services such as MMS are coming, Nomura said that consumers have been used to getting better value for money. Convincing them to spend more of their disposable income while the competitive landscape gets tougher, and regulatory intervention mounts, may prove an insurmountable challenge for mobile operators.

Nomura estimates that Vodafone will only increase subscribers this year by 10% and it said that its subscriber base will start declining beyond 2005 due to the effects of increasing competition.

Adding to the gloom surrounding the company, its Japanese unit J-Phone Co Ltd has put back its 3G launch date for this second time, this time to December from June. It said it needed the time to conform with international 3G specifications and would start a trial service at the end of June. This leaves J-Phone trailing in the 3G race as rivals NTT DoCoMo Inc and KDDI Corp have already launched services.

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