Vodafone upbeat as 3G takes off

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Mobile phone giant Vodafone has doubled its dividend to shareholders following the “successful” launch of its third-generation (3G) services.

The company is also expanding its share buyback scheme by one-third to about £4bn ($7.4bn) thanks to strong underlying half-year profits.

Pre-tax profits were flat at £5.4bn, tempered by revenue loss following the sale of its Japanese fixed-line arm. The 100% dividend rise to 1.91p was at the top end of analysts’ expectations.

Vodafone, the world’s largest mobile phone company by revenue, said it also expected to double its full-year dividend.

There was a muted reaction to the news, with Vodafone shares closing down 0.75p at 142p.

“We continue to believe that the introduction of 3G will limit earnings growth next year,” Seymour Pierce analyst Dan Gardiner told the Press Association news agency.

Last week, Vodafone launched its UK 3G services for mobile phones, offering video calls, music downloads and games, enabling users to download data at a faster rate than before.

Vodafone and rival mobile company 3, owned by Hutchison, are the only UK telecoms firms offering 3G services to mobile phones. However, rivals Orange and T-Mobile are getting ready to launch their UK 3G services in the run up to Christmas.

Vodafone said it had won 7.4 million new customers in the first half, lifting the number of subscribers to 146.7 million worldwide. The only rival with more subscribers is China Mobile (Hong Kong) Ltd, which has 194.4 million customers.

“Overall, the business is performing well and on track with our expectations at the beginning of the year,” said chief executive Arun Sarin.

Vodafone reported strong performances at its UK, Spanish and German operations, as well as at its US joint venture Verizon Wireless. This offset weakness in its struggling Japanese unit, Vodafone Holdings and the impact of the strength of sterling against the euro and yen.

Vodafone said it was “excited” about the future growth prospects, particularly in light of last week’s launch of mass-market 3G mobile phone services which were rolled out in 13 separate countries.

The company’s decision to increase the amount of cash it returns to investors marks a major shift for the Newbury-based group. After a period of expansion, which it achieved largely through acquisitions, the company is now settling into a period of consoli

dation.

Dreaming of a 3G Christmas

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Are you a YAF – “young active fun”? Read on, this might change your life (and your bank balance).

Are you outside the bracket of the well-earning 18-to-34 year olds? Read on, this might affect the health of your pension fund.

There is a lot riding on the fortunes of third generation mobile phone services (3G).

For those at the cutting edge of mobile communications, they promise a “leap” to a whole new lifestyle.

For the rest of us, the success or failure of the heavy 3G investments will determine telecoms share prices, and most pension funds will have at least some exposure to that.

It has been a slow start. Most 3G licences were awarded four years ago, for lots of money.

Vodafone spent some £14.7bn ($27.3bn) around the world for these licences, £6bn of that in the UK alone.

Then billions more to set up the network and overcome technical problems.

Now it is payback time, and that’s where the YAFs come in.

3G phones give users more bandwidth and higher connection speeds.

In real life this translates into phones that allow you to make video calls, download songs and films, watch football highlights on Saturday afternoon in the park or play sophisticated computer games on the move.

And the people happy to pay for such premium services are Vodafone’s YAFs, the same demographic that has already signed up to the company’s Vodafone Live! service – currently about 10 million worldwide (out of a total of 140m).

The service combines snazzy phones with rich content and traces its success to the “Beckham phone”, hawked in a series of adverts with the English football captain (who returns to Vodafone adverts for the 3G launch).

Peter Bamford, chief marketing officer of Vodafone, gives this real-life example of a 3G test user: The man and his girl friend did not know what to do with the evening, they checked out a few film clips on their 3G phone, settled on a movie, checked which cinema showed the film, booked two tickets and downloaded a map on how to get to the cinema.

Old hat if you are online, but fairly cutting edge if you sit on the commuter train from work to home.

The new “Vodafone Live with 3G” offering takes this concept further and combines speed with hefty mobile computing power and high-spec video phones (one model boasts a 2 Megapixel camera).

Those used to the bulkiness of early 3G models will be pleasantly surprised. Just a smidgen larger than today’s GSM phones they don’t weigh much more, but sport crisp colour screens.

And while the typical “Live” subscriber delivers 7% more revenue than other Vodafone users, 3G bundles are supposed to boost shareholder value even further.

Wherever you click around the service, chances are you encounter a little buy icon. 25 pence here, £2.50 there – it all can add up to a hefty lifestyle phone bill.

Throw in music downloads and a bit of pornography – its explicitness tailored to the local market and the access controlled to keep it out of the reach of children – and you have a revenue model.

“This is an opportunity to increase revenue growth, profit growth and cash flow growth,” says Vodafone boss Arun Sarin.

With Vodafone putting a price tag of £200 and more on phones that come with its 3G pre-pay services, and some 3G contracts running up to 18 months and costing up to £60 a month, the spring in Mr Sarin’s step at the 3G launch seems reasonable.

But ultimately, as Mr Sarin himself acknowledges, the new 3G phones are just an “evolution, not a revolution”.

Is that good enough to attract the punters?

And there are more question marks.

Are there enough YAFs to justify the huge 3G investment?

Vodafone hopes to have 10 million “Vodafone Live with 3G” customers by March 2006, with about half of them “upgrades” for existing customers.

Rival 3 has been working markets in the UK, Australia, Hong Kong, Sweden, Denmark, Austria and Italy for 18 months now, and subscriber numbers have been well below expectations.

Company insiders hint that uptake has greatly accelerated during the past three months, with subscriber numbers up by about 50% to nearly two million.

But this is probably the result of recent aggressive discounting and the launch of new smaller, heavily subsidised handsets.

With Orange and T-Mobile expected to launch their competing 3G services in December, can prices be kept at premium levels? 3’s chief operating officer Gareth Jones claims that he is already undercutting Vodafone’s price plans.

And what about the vast majority of mobile phone users that are not YAFs and have little need for streaming video or advanced computer games?

In Sweden a start-up mobile phone company managed to grab more than a third of the market by offering a stripped down service with feature-poor mobile phones but cheap and easy-to-understand pricing plans.

So with just 16 years to run on Vodafone’s UK licence, can 3G generate enough revenue to justify the huge investment?

Well, the secret hope of all 3G operators is called convergence.

“If you ask people to take everything out of their pockets but three things, they will keep their keys, their wallet and their mobile phone,” says Vodafone’s content expert, Guy Lawrence.

Tough luck for the iPod, because in a year’s time, give or take three months, 3G phones will contain hard disks as large as today’s iPod digital music players, he claims.

And why take a digital camera when 3G cameras are racking up the mega pixels?

With prices plummeting and juicy contracts allowing network operators to subsidise handsets, 3G phones could find their way even into Granny’s handbag – just like today’s camera phones.

With nifty market segmentation – tailoring the phone and the price plan to target ever smaller niche markets – and three or four years down the line the profits could be rolling in.

This year won’t see a 3G Christmas. But for shareholders, the 3G Christmas is one that can’t come too early.

UK Internet Users vote PlusNet number one for Customer Service

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PlusNet is delighted to announce that it has won not one, but two major categories in this year’s influential Future UK Internet Awards. Crowned ‘Best Consumer ISP’ for its popular range of great value products and services, PlusNet has also been honoured with the ‘Customer Service Award’ – voted number one both by the public and a panel of magazine and industry experts alike.

The Customer Service Award, sponsored by Internet and Broadband Advisor magazine, has been awarded to the Internet business that has demonstrated the best customer service throughout the year. PlusNet beat off several highly respected names to this prestigious trophy from all areas of electronic commerce.

Dan McNamara, Editor of Internet & Broadband Advisor said: “In 2004, PlusNet has led a price revolution in the consumer market, and most importantly has continued to deliver in the key areas of reliability, speed and customer service. In our experience their customers are a happy bunch, and the votes speak for themselves, making PlusNet a deserving winner.”

Marco Potesta, Marketing Director at PlusNet said: “We’re delighted to have been awarded two Future UK Internet awards this year. It’s a great honour that recognises the continued success of PlusNet and particularly places emphasis on the dedication and efforts of our employees. Our sincere thanks go to them, and to our customers for voting for us.”

2004 has been a remarkable year for PlusNet. Having launched 512k broadband from just £14.99 per month earlier in the year, with free transfer for new customers moving to PlusNet from another broadband provider, it successfully floated on AIM in July.

The last few months have seen continued innovation, with increased broadband availability across the UK and more low-prices from PlusNet, with 1Mb broadband now starting from only £14.99 and 2Mb products from only £19.99 per month.

 

 

Checkout the latest deals on PlusNet broadband here.

Vodafone begins 3G mobile service

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Vodafone has launched its UK third-generation (3G) services for mobile phones, offering video calls, music downloads and games.

The 3G technology enables users to download data at a faster rate than before, offering better quality sound, pictures and video.

Until now, 3, owned by Hutchison, has been the only UK telecoms firm offering 3G services to mobile phones. Orange and T-Mobile are set to launch their UK 3G services before Christmas.

However, 3G services will not be available everywhere – with all networks covering just parts of the country, mainly large population centres and key industrial areas. In areas without 3G coverage, the phones will be using the operators’ network for GPRS phones, also known as 2.5G.

Vodafone is launching its 3G services in 13 countries and is aiming to attract 10 million 3G customers by March 2006. The success of 3G services is seen as crucial to the company, which has spent £14.7bn ($27.3bn) around the world – £6bn in the UK – on 3G licences.

Rival 3, which launched its 3G services more than a year ago, says that it has managed to sign up 1.2 million UK subscribers. Orange is expected to launch its 3G service in December, and claims that its network currently has the UK’s widest coverage of 3G services.

In April this year, Vodafone began selling 3G datacards in the UK that allowed internet connections to laptops at seven times the speed of fixed-line services. Then in May, the company started its roll out of mobile 3G services by launching operations in Portugal and Germany.

Vodafone chief executive Arun Sarin said the company’s full 3G launch was “the start of a new era in mobile communications”.

“Customers want communication, organisation, entertainment and information on the move and they will increasingly turn to one device to deliver these needs – their mobile phone,” he added.

Vodafone’s 3G phones will enable users to make video calls, send and receive video clips, download full-length music tracks and watch Premiership and UEFA Champion’s League football highlights. A range of 10 new 3G handsets is being launched – six in the UK – including what Vodafone says is Europe’s first two-mega-pixel camera phone, the Sharp 902.

Vodafone is launching two price packages for its 3G services. The £40-a-month package includes 500 minutes of voice calls, 100 text messages and 50 minutes of video calls. Sending pre-recorded video messages will cost 60p per message, and the package also includes Premiership football highlights, breaking news and film trailers.

The £60-a-month bundle includes the same features but includes 1,000 minutes of voice calls. Vodafone is also offering a pay-as-you-go service.

However, whether people will be prepared to pay more for the 3G services is not certain, experts said.

“The real question is whether it generates a lot more business for Vodafone,” Mark Newman, chief research officer at Informa Telecoms and Media, said. “I think it’s questionable whether people are going to spend more money for 3G phones. While the 3 network has managed to attract more than a million customers, Mr Newman said this was “not because they’ve been offering more services but because they’re offering cut price phone calls”.

And he said it would take a long time before the mobile phone changed from being an ordinary communications tool into a multi-media centre.

“I think this will happen but it’s going to take 10 to 20 years rather than the overnight success that people were hoping for, he said”.