Vodafone blames big loss on India and other impairments

UK operator group Vodafone announced a net loss of €7.8 billion for the six months to the end of September, thanks largely to some one-off impairments.

Group revenue was down 5.5% year-on-year, but the company wrote down €3.5 bil on the disposal of Vodafone India and a similar amount for various impairments that also included India as well as Spain and Romania. There was also the time-honoured adjustments for currency and various other bits of accounting arcana that presumably make sense to someone. Here’s the P&L, which registers a slightly higher loss, but what’s a hundred mil between friends?

Vodafone 2018 P&L

“Our performance in the majority of our markets has been good during the first half of the year, and we have taken decisive commercial and operational actions to respond to challenging competitive conditions in Italy and Spain,” said Vodafone Group Chief Exec Nick Read.

“Looking ahead, my new strategic priorities focus on driving greater consistency of commercial execution, accelerating digital transformation, radically simplifying our operating model and generating better returns from our infrastructure assets. Our goal is to deepen customer engagement through a broader offering of products and services and to deliver the best digital customer experience, supported by consistent investment in our leading Gigabit networks.

“As part of our effort to improve returns, we are creating a virtual internal tower company across our European operations, and we are reviewing the best strategic and financial direction for these assets. Our focus on organic growth along with the strategic and financial benefits of the proposed acquisition of Liberty Global’s assets give confidence in the Group’s ability to grow free cash flow, which underpins our dividend.”

The comment about towers seems to imply Read is thinking of selling and leasing back some towers, or something like that. The upshot seems to be that Vodafone is fine for cash (the write-downs were mainly the devaluation of existing assets, so there’s no expenditure involved) and so it’s fine to maintain the current dividend level. This resulted in Vodafone’s share price ending the day around 8% up, so no worries. You can read further analysis of Vodafone’s numbers here.

The iStore is a perfect example of how we can make money – Vodafone

Many around the world will use Apple as a benchmark of how to successfully engage the digitally native consumer, though it’s the development of the iStore ecosystem which can be used as a model for the telcos.

Speaking at Light Reading’s Software Defined Operations and the Autonomous Network event in London, Atul Purohit from Vodafone Group pointed towards the slow-burning and long-term investments made in creating the app store as the way to make money in the digital economy. This is ultimately one question which will frustrate a lot of telcos, how will the vast expenses on 5G be recaptured over the next decade?

With 5G, MEC and IoT trends starting to make more concrete impacts on the real world, Purohit suggested a platform model should be built these technologies, with the telcos forming the centre of the ecosystem. This is not the blockbuster cash generator, a silver bullet to recoup lost billions, which some investors might want, but it is a sensible, sustainable business model. In fact, you can already see the benefits today.

Apple’s iStore and Google’s Play Store are excellent examples of careful development of an ecosystem and the rewards which can be realised when a segment matures, but the smart home is another. Most would have presumed the telco would be an excellent focal point for the smart home ecosystem, primarily because the router is already an accepted fixture in the living room, though the likes of Amazon and Google has imposed the smart speaker in its place.

This is an example of inaction than anything else, as the proactive internet giants wrestled the focus of the smart home away from the router and the cumbersome telcos, and onto the speaker. Services and products are being built around the smart speaker, and the financial rewards will be claimed by Amazon and Google. With personalised experienced and IoT trends of tomorrow, the telco still has an opportunity to stake its claim to be the focal point of these ecosystems.

This is a business model which will mature over time, requiring long-term investment and patience above all else, though it is a model proven successful time after time.

5G ROI is a no-brainer for us – Orange

5G is clearly critical for the digital economy of tomorrow, but the expensive job of rolling out the networks take a bit more cunning thought.

Speaking on a panel session at Total Telecom Congress in London, Yves Bellégo, Director of Network Strategy at Orange pointed out there is no debate on the ROI for 5G. It’s simple; 5G enables us to deliver data significantly cheaper. With internet traffic continuing to explode, and mobile usage heading north as well, why wouldn’t anyone want to invest in something which can make business operations cheaper.

But here is the clincher; rolling out these networks is an expensive job, and ROI still hasn’t be completely justified. Telcos will have to accept the ‘build it and they will come’ attitude, though trying selling that to accountants. As Takehiro Nakamura, General Manager of 5G Labs at NTT Docomo pointed out, 5G will not just be there overnight, the rollout out will be gradual and it will be years before the concept of nationwide if even close to a reality because of this very reason.

For 5G to realise its potential, there will need to be considerable thought to identify the services which can be offered from Day One. It isn’t going to be as simple as offering a sweeping portfolio of new services, with the progressive rollout which many telcos have in mind, with 4G and 5G working alongside for years to come, difficult choices will have to be made.

Fortunately, a lot of these services can be offered on 4G, though as Ramy Boctor, CTO of Vodafone Qatar, pointed out, the performance will just be better on 5G. Perhaps this will play into the hands of the telcos; limited supply and potentially high demand, a perfect recipe for making money.

This is perhaps a fact which is lost in the buzz and hype; 5G will be incredibly limited for years to come. The rollout will take time, upgrading existing sites will take time, densifying the network with new sites will take time. This is not something many people seem to be saying, but it is worth remembering.

Vodafone next on the 5G ‘first’ campaign trail

We thought we were safe from misleading 5G claims in the UK, but Vodafone has become the next telco to push the boundaries on what is deemed an acceptable ‘truth’.

The statement this morning is a relative bold one; “Vodafone first to switch on full 5G in the UK”, though it is heavily nuanced. Despite it sounding like a 5G bonanza for us to get excited about, these are trials, commercial services are not being offered to customers, once again proving honest statements and transparent claims are difficult concepts to swallow. In fact, this isn’t even the first 5G trial to be launched in the UK after EE pushed the line of truth earlier this month.

However, it is a step in the right direction in a market which was feared to be miles behind the 5G curve.

“We are leading the roll out of 5G across the UK, starting with Greater Manchester,” said Vodafone CEO Nick Jeffery. “A further six cities – Birmingham, Bristol, Cardiff, Glasgow, Liverpool and London – will shortly receive full 5G too. Next year, we will bring 5G to the Scottish Highlands, Cornwall and the Lake District, among other locations.”

As part of the trial, live mobile data traffic is being streamed to and from the internet exclusively over 5G from a site in Salford, Greater Manchester, connected to Vodafone’s nationwide converged fibre network. Previous trials have been focused on single locations or used part of a 4G network to complete the work, so it certainly is a step forward.

Despite the ‘first’ and ‘switch on’ claims being a bit difficult to swallow, Vodafone has been making progress. Last month the team impressively demonstrated a live holographic call between Newham and Manchester, sparking the imagination to what is possible in the 5G world. For too many years the industry has focused on bufferless cat videos on the go as the 5G driver, but now we are starting to see some creative and engaging usecases.

Looking forward, the team are currently receiving applications for companies which want to be involved with the future 5G trials at the new ‘Future Ready’ innovation centre and digital incubator when it opens in Spring 2019. Vodafone has said the lab will be piled to the ceiling with the latest gadgets including 5G wireless routers, gigabit-capable optical-fibre links and IoT services, which can digitally connect everything from office security systems, vehicles, and household appliances to livestock and pets.

While the telcos are taking the suspect approach of over egging the 5G pudding here, this is progress. Many were sceptical over the 5G preparedness in the UK, though progress is being made. When 5G-compatible handsets arrive in mid-2019, the UK 5G networks will be there or there about to offer commercial services. Who would have thought we would have been saying that 18 months ago.

EE holds onto Opensignal MNO crown

EE has held onto its position as the best performing UK MNO according to the latest figures from Opensignal.

For 4G download performance, EE maintained its leadership position with average download speeds of 29 Mbps between June and August, while it also led in upload speed, latency and availability. This is not to say there weren’t improvements elsewhere, Vodafone grew its average 4G download to 21.9 Mbps, though Three’s dropped with the telco slipping down to third place in the performance rankings.

4G might not have been a fruitful playground for Three, but it did steal the top-spot for 3G speeds off EE. With average speeds of 7.8 Mbps it edged just ahead of EE at 7.2 Mbps, though this will come as little comfort as telcos increasingly look to re-farm 3G spectrum to bolster 4G performance.

Interestingly enough, O2 is still maintaining its position as the leading telco in terms of market share, despite a damning review of the telco from Opensignal. O2 sat in last place for all categories aside from latency (3G and 4G) and availability, where it was second behind EE. O2 might arguably have the weakest network in the UK, the power of promotions seems to counter this position. The Priority loyalty programme is perhaps proving its worth in gold here.

While many will preach the benefits of having the best network, these figures show it’s not always about being the fastest.

Opensignal Awards

Ofcom isn’t happy with EE and Vodafone’s coverage predictions

UK telecoms regulator Ofcom has opened separate investigations into coverage predictions offered up by EE and Vodafone.

In what seems like a fairly pedantic move Ofcom has announced it’s looking into information provided by the two MNOs when it asked them to say how much of the country they expect to cover. Bizarrely EE is suspected of overestimating its 3G coverage, while Vodafone may have under-predicted its 4G coverage.

Why any of this matters is unclear. Ofcom uses these estimates for its own studies into UK mobile coverage, which are ultimately politically sensitive due to the tendency for politicians to grandstand on behalf of those people with dodgy coverage. It’s possible that Ofcom is getting political heat and is looking for scapegoats. Here are the two Ofcom statements.

“On 1 October 2018, Ofcom opened an investigation into EE’s compliance with requests for 3G mobile coverage predictions across the UK under these rules. This followed on from the identification by Ofcom of errors in the 3G/2100 MHz coverage data that EE provided which meant that its 3G coverage was over-predicted, particularly in rural areas.”

“On 1 October 2018, Ofcom opened an investigation into Vodafone’s compliance with requests for 4G mobile coverage predictions across the UK under these rules. This followed on from the identification by Ofcom of errors in the 4G/800 MHz coverage data that Vodafone provided which meant that its 4G coverage was under-predicted, particularly in rural areas.”

As indicated by the beeb, the operators will claim some combination of innocence, mitigation and contrition, so it’s hard to imagine anything significant resulting from these probes. Maybe Ofcom just likes to throw this sort of thing at operators every now and then just to keep them on their toes.

Only one in four businesses are ready for digital era – Vodafone

Despite dawn breaking on the digital economy, Vodafone claims only 24% of businesses globally could reasonably call themselves cyber ready, but those who are should prepare themselves for a cash boost.

Releasing its Cyber Ready Barometer, a report to measure how firms are progressing towards the digital era, Vodafone states the average score for UK businesses in terms of cyber readiness is 46/100, with only 34% of businesses achieving ‘Advanced’ status. Those who are classed as ‘Cyber Ready’ scored 4.3/5 for reported stakeholder trust (customers, employees and regulators) while 47% reported annual revenue increasing by at least 5% in the last 12 months.

“From our perspective the biggest takeaway from the research was how few business are truly cyber ready and how many were not doing the basic controls,” said Vodafone Enterprise Cyber Security Lead Maureen Kaplan. “The need to protect organizations is absolutely critical but only one in four are actually proactive. That is worrying from a societal view point.”

One of the reasons for this could be a disconnect between the IT department and the employees within the business. While the IT department is searching for new ways to make the business digital ready, Kaplan worries whether right steps are being made and even if the department has a complete understanding of the business.

A good example of this is the growing mobility trend in the UK. On average, the IT department believes 43% of staff use their own device for work, while 63% of employees stated they do so. A significant proportion of those using smartphones or personal computers for work purposes could be deemed a threat to the organization.

With the UK government targeting digital as a means to ensure the economy remains competitive in the post-Brexit era, these statistics should be quite a worry. That said, perhaps a bigger concern is the security aspect of the piece.

Cyber ready isn’t simply a case of being capable of achieving new revenues, securing data, both customer and business, is just as critical. Aside from the impact this can have on relationships with customers, the financial penalties for not meeting the required standards are starting to ramp up very quickly. Interestingly enough, those who have been the victim of a data breach are generally deemed more cyber ready than those who haven’t.

That said, looking at the business case, Kaplan suggests the idea of being cyber ready and secure can be used as a differentiator. 34% of consumers said they are increasingly aware of security threats being discussed in the media, 70% consider themselves to be at risk of a cyber-attack or online threat, while 63% have stopped using at least one online service due to security concerns. 43% don’t trust the security of companies they still use.

When it comes to consumer adoption of the digital economy the trends do seem to be increasing despite these security concerns. The average consumer currently now uses nine different connected devices at home and eleven different online services, ranging from online banking to gaming and fitness trackers. Concern is highest about the security of mobiles devices (83%) and computers (82%), but newer devices like voice assistants (60%) and smart home controls (53%) are also a cause for concern. Financial data is naturally the biggest worry, though only 51% expressed concern about using social media and only 45% online dating services. These are less obvious threats, though personal information taken from these services can be used to build profiles on users to navigate around security protocols (security questions for example) or create fake accounts for authentication.

In terms of the business opportunity, 59% of the research’s respondents suggest they would be prepared to pay a premium for higher levels of security on the products and services which they use. This claim suggests there is a business case and revenues to be won through a greater focus on security, though only 29% of businesses see there are significant financial benefits from having higher levels of security. With 71% of businesses not recognising the opportunity, and 59% of consumers prepared to pay a premium for peace of mind, there is certainly money to be made through security.

While much of the world looks at security as a box ticking exercise, simply remaining compliant and avoiding hefty fines, that is not the message Vodafone; being secure can be a way to make money as well.

NB-IoT gathers momentum

Trials in Australia and the UK involving Ericsson and Vodafone indicate the NB-IoT is starting to become a reality.

Ericsson and Telstra are claiming the longest connection for the narrowband wireless standard that is set to be the default for IoT. The trial used a Telstra base station to communicate with an NB-IoT temperature sensor 94 km away on Mount Cenn Cruaich in New South Wales, Australia. They say the previous range limit was more like 40 km.

“We’re partnering with Telstra to deliver its customers a world-leading capability in NB-IoT extended range cells and demonstrating the huge opportunity that IoT represents in rural and regional areas for both Australia and globally, particularly for logistics and agriculture,” said Emilio Romeo, Ericsson’s MD for Australia and New Zealand.

“Telstra already had Australia’s largest IoT coverage with Cat M1 across our 4G metro, regional and rural coverage footprint,” said Channa Seneviratne, Telstra’s Executive Director of Network and Infrastructure Engineering. “With this NB-IoT extended range feature, we have now extended our coverage to more than three and a half million square kilometers, delivering our customers the best IoT coverage and capability in the country.”

Meanwhile Vodafone has started trialling NB-IoT in the UK, as reported by Light Reading. Energy company Scottish Power is Vodafone’s first UK NB-IoT customer and is using IoT temperature sensors to detect when some of its remote kit might be overheating. They’re apparently powered by standard AA batteries and each one costs a couple of quid.

Lastly Counterpoint Research has found that global cellular IoT connections grew by 72% in the first half of this year and forecasted NB-IoT will account for around half of all IoT connections in the long term. As you can see from the charts below most of the action seems to be happening in China, but Vodafone is leading the international effort.

Counterpoint IoT 1

Counterpoint IoT 2

“Emerging markets like India, Brazil and in Africa while can offer tremendous scale but will likely be late followers compared to China in this path to connected everything,” said Satyajit Sinha of Counterpoint. “However, the massive growth opportunity remains in terms of cellular-IoT connections in emerging markets which will be possibly catalysed by operators such as Jio in India but more specifically from multi-market players such as Telefónica, MTN or Vodafone with plans to deploy LPWAN networks such as NB-IoT leveraging scale across their coverage markets.”

“Revenue generation from the IoT ecosystem is not siloed to any one specific segment of the value chain, rather it is distributed among all segments,” said Neil Shah of Counterpoint. “On an average for a cellular IoT solution deployment, connectivity represents around 12%, whereas hardware components, modules and devices represent 22%.

“The rest of the bulk of the value in an IoT solution is captured by system integrators, middleware, software platforms, and cloud analytics vendors. Hence, if operators are looking to capture maximum value, the strategies need to provide an end-to-end IoT solutions by bundling IoT devices, secure connectivity, platform, and data management to capitalize on the overall opportunity.”

The big variable with IoT, of course, is revenue. It doesn’t look too tough to scatter billions of sensors all over the place and connect them to the cloud via NB-IoT or whatever, but getting companies to pay for services on the back of them is another matter. It looks like a lot of the commercial precedent will be set in China, so the rest of the world might wait to see how that plays out before committing.

Vodafone dubiously tries to fix AI/job loss conundrum

Is the cost of profitability and efficiency worth the PR damage caused by automation and redundancies? That’s one of the difficult questions facing companies in the AI era.

If you listen to the people creating the AI applications, the opportunity is simple. Create technologies which take care of the time-consuming, monotonous tasks, freeing up staff to concentrate on tasks which add more value and revenue to operations. This is an optimistic view. The pessimist (or realist) would suggest business owners and management teams would use the technology to tackle the biggest overhead of any organization; us.

The smaller a workforce, generally the more profitable a business is proportionately. Amazon knows this, it is investing in cashier-less supermarkets and robots to run its completion centres, while public transportation services have been offloading jobs in favour of technology for decades. When there is an opportunity to spend less money but make the same amount, businessmen would bite your hand off.

At the Future Ready press conference last week, Vodafone unveiled an interesting idea. Those who are at risk of losing their jobs to the automation craze, customer service agents, will be reskilled as coders and developers.

Known as the Code Ready initiative, it is a great idea on the surface. Retraining employees to take advantage of the fast growing craze which could eventually make them redundant, though we have our reservations. Coding it complicated and not for everyone. You have to be a very specific type of person with quite a tailored education to suit the role, and we wonder how many of those who work in Vodafone call centres meet the criteria.

Without sounding disrespectful to the employees currently in the call centres, coding to the specifications and quality Vodafone needs to ensure its software, services and applications meet the demands of the cut-throat digital economy will be a challenging task. Perhaps the technology orientated universities or app trade shows would be a better place to look than the customer service centres.

Neil Blagden, Director of Digital & Commercial Operations at Vodafone UK, will point to TOBi, Vodafone’s customer care virtual assistant, as precedent for the initiative. Six customer service agents contributed to the development of TOBi, though we suspect the heavy lifting and critical aspects we completed by those who have a bit more experience than these six.

Applications such as TOBi have the power to make a genuine difference to operations. Not only is the Vodafone customer care operation more efficient since TOBi, Net Promoter Score has been growing as well. Clearly there is an advantage to integrating such technologies, though a poorly constructed application will only lead to frustration and customer churn. To avoid this scenario, Vodafone will need to ensure it is hiring the best people possible.

The idea is a nice one, but we suspect it is nothing more than a shallow publicity pitch from the Nathan Barley wannabees in the marketing and PR team. There might be a few success stories, but these will only be pumped as gloss to sheen over the redundancies the firm is bound to make as automation takes a stronger grip.