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Vodafone ARPU stable

But market sees little to celebrate

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ComputerWire: IT Industry Intelligence

The advanced maturity of Europe's formerly booming wireless network business was underlined yesterday as Vodafone Group Plc, the biggest operator in the region, posted quarterly subscriber growth figures down heavily on the earlier quarter.

Net subscriber growth for the Newbury, UK-based company was 1.3 million in the quarter, compared to 4 million in the previous quarter, and pushed the company's global customer base to 101.1 million proportionate users.

The positive quarter, which brought the net growth for the year to 18.1 million (22%) was mildly surprising, belying fears that Europe's high wireless handset penetration (now at 70% of the population), coupled to the negative effects of Vodafone attempts to decrease the proportion of pay as you go users would see a net decline in subscriber numbers.

Nevertheless, whilst average revenue per user (ARPU) per month was also said to have stabilized, the positives in Vodafone's latest indicators did little to outweigh a sense of impending crisis for the company, and for the rest of the global wireless network operator (WNO) community.

In London, the muted response of analysts did little to dissuade a growing perception that pressure on Vodafone's share price is sharpening, and Reuters reported an "appetite to dump Vodafone stock" is evident among some market makers. The key to this sentiment, one analyst said, is that until investors see concrete growth in ARPU, they will treat any indicator statement as essentially negative.

Certainly, yesterday, the assertion of Vodafone's chief executive Chris Gent that "this year has seen ARPU stabilize in our major markets, ahead of our previous expectations, .... [and] the continued adoption of data services provide a solid base for an expected improvement in ARPU in most of our major European markets in the year ahead" smacked of making the most of thin material.

In fact, in at least one of Vodafone's key European markets, Germany, ARPU slipped 5 euros ($4.49) to 298 euros ($267.4m) as the net subscriber base of its former Mannesman network fell 399,000. In Vodafone's other key European markets, Italy and the UK, the news was positive, if modest.

Overall, data services contributed 13% of revenue, an increase of 4% in the quarter, and grew 3% to 11% of revenue for the year. This is moving in the right direction, and might show some acceleration once the group's dependence on SMS (by far the biggest source of data revenue) is diluted by the emergence of MMS and the roll-out of new GPRS-based applications.

However, GPRS uptake is still lackluster, with little to suggest that Vodafone and other operators truly have compelling new uses for it waiting in the wings. The growth of MMS revenue will have to wait for a new generation of handsets to penetrate the market, which also looks an optimistic bet in the present climate, and runs contrary to MNO ambitions to reduce their commitment to subsidizing handset sales.

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