Vodafone top two take 20% bonus cut due to rubbish share price

Chief Exec Nick Read, and Chief Financial Officer, Margherita Della Valle are taking one for the team because Vodafone hasn’t been performing.

Vodafone’s share price is down 15% since the start of this year, 19% since Read took over at the helm and 44% since the start of 2018. Corporate tradition is for senior execs to get massive bonuses regardless of how badly their company is performing, while still attaching strict performance conditions to their underlings’ variable pay.

Possibly in anticipation of a looming shareholder meeting Read and Della Valle voluntarily requested the 2020 conditional share package they were recently awarded be cut by 20%. “This was requested to reflect the low valuation of the share price following its reduction over the year and particularly the change in value between the date of the Remuneration Committee’s decision in respect of the value of the Awards and the date of grant,” said the Vodafone announcement.

Of course they’ll still get 80% of the award so long as they meet whatever conditions are required for the payout. These weren’t detailed in the announcement but since they’re usually no more tricky than not resigning or getting sacked, let’s assume they’ll get them in full. So that means Read will get 3,887,636 shares and Della Valle 2,366,387, which equates to around £5 million and £3 million respectively.

You could argue that the dynamic duo inherited a lot of the aggro that has befallen them since they took over, such as the India situation. But Read was previously the CFO and Della Valle his deputy, so it’s not like they didn’t have a major hand in it. But they seems to be headed in the right direction in the UK, at least, so maybe they will look back on this moment as their nadir.

Vodafone UK edges in front with ‘wider pipe’ approach to 5G

It’s always difficult to offer a winning position before all hands have been shown, but Vodafone looks to have stretched a nose ahead in the UK 5G race.

For the moment, we can only really judge two of the four 5G propositions in the UK, though there have also been hints from Three. With EE launching its 5G assault last month, and Vodafone switching on this week, it does seem that the latter has re-found its mojo and could challenge leadership positions in the UK connectivity standings.

As it stands, O2 and EE are sitting very comfortably in the number one and two spots respectively. With 36% and 33% market share for mobile subscriptions, according to Ovum’s WCIS, Vodafone is a distant third with 20% and Three falls away with 11% in fourth. However, that can all change very quickly, it wasn’t long ago Vodafone was the clear market leader.

Looking at the current offerings from the UK MNOs, Vodafone does look to have a more attractive offering. On the subsidised handsets front, the two are pretty much on par with Vodafone being a little bit cheaper. However, the SIM-only offering might grab the attention of a lot of people.

This is a model which we think is much more suited in the 5G era. If you believe the technologists, delivering data over 5G networks is cheaper than 4G. This is down to efficiency gains on the spectrum front, as well as improvements to antenna and the introduction of new technologies such as Massive MIMO. If it is becoming cheaper to give data to the increasingly insatiable consumer, why not offer unlimited.

Tiering on speeds is a very interesting approach. Data usage is going up for every demographic, such is life as more aspects become digitised, but the variety of ways people consume that data is becoming increasingly varied. Some will only use the internet for browsing, some focus on video consumption and others are gamers. Each different experience can be satisfied by different speed limits.

What will need to be done over the next couple of weeks and months is educating the consumer. Most consumers think faster is always better, but sometimes this is not the case. The majority of consumers could get by with mobile connectivity of 10-20 Mbps, but many think they need the fastest possible connection.

If you are in an urban setting and not able to use the internet on your device properly, the immediate assumption is that speeds are not fast enough. This might be the case, but another explanation is that there are too many people attempting to connect through the same cell site. This is network congestion, its not necessarily anything to do with speed, but too many people are clogging up the digital highway.

This is where 5G can add benefits over 4G. Think of the ‘internet’ as a water pipe. Not only does 5G make the water flow faster, it makes the pipe wider to allow more water to flow through it. This should address the network congestion challenge in various places if more people are connecting more devices to the same cell sites.

With this concept in mind, Vodafone has built the speed-tiered options; all you have to do is work-out how you use your phone, decide on a suitable speed and then you never have to worry about using up your data allocation ever again.

The one criticism we have is the pricing, which you can see below:

Speed limit 2 Mbps 10 Mbps Fastest possible
Price £23 £26 £30

On the lower end of the scale, the 2 Mbps tier, we believe Vodafone has charged a bit too much. And on the upper-end, the telco probably could have charged more. The strategy appears to be gearing as many people as possible to the middle tier which effectively undermines the concept of having experience designed tiers in the first place.

The success of this initiative will entirely depend on whether Vodafone can educate the consumer on the basics on connectivity experience. The water pipe analogy is a good one to explain the difference between 5G and 4G, though it would also help to inform users of how much speed is required to do what.

How much do you need to use WhatsApp, watch YouTube or play Harry Potter; Wizards Unite, for example. The general consumer in the UK will not know the answer to this question, and unless they do, this Vodafone strategy will likely fail.

Ericsson and Huawei virtue signal over Vodafone 5G launch

Kit vendors Ericsson and Huawei were both quick to bask in the reflected glory of Vodafone UK’s 5G network launch but Nokia kept quiet.

Ericsson proudly declared Vodafone’s 5G network will be powered by its technology – specifically the Ericsson Radio System. The company made an appearance at the launch event and both Ericsson and Vodafone provided canned comments in the press release that were so generic you don’t need to read them. Suffice it to say 5G is a really big deal and both companies are really good at it.

Marielle Lindgren, UK & Ireland CEO of Ericsson, did at least attempt to say something noteworthy. “The UK has taken a leading role in launching 5G services early while much of Europe lags behind, slowed by local regulation,” she said. “This early advantage is likely pay dividends, with superior connectivity forecasted to make a contribution of around £300bn to the UK economy by 2030 according to independent research commissioned by Ericsson.”

This seems to be a dig at European legislators and regulators along the lines of consistent public whinges from Ericsson CEO Börje Ekholm, who thinks Europe is lagging behind the rest of the developed world due to excessive regulation and stodgy bureaucracy. It must be really sticking in the throats of the European Union that the UK has got its 5G act together quicker than its core members.

Meanwhile Huawei was sure to highlight the fact that it’s far from shut out of the UK 5G market. “We are proud to be helping Vodafone open up a new world of seamless opportunities with their launch of 5G mobile services in the UK,” said Huawei SVP Victor Zhang. “This reinforces the UK as a 5G leader and builds on our 18 year history of supporting the digital economy here.”

This will just be the RAN, of course, with Huawei involvement in the core out of bounds for any country interested in staying in the good books of the US, but that’s still more than Nokia can claim. As reported by Light Reading earlier this year Nokia is being phased out of the Vodafone UK network, which explains its sullen silence on this matter.

Vodafone ‘rips up the rulebook’ with new 5G pricing model

With EE claiming the ‘first’ accolade many telcos seem to think is critically important, Vodafone needed to do something different to gain attention; this pricing move might well be an important one.

The idea is simple. Instead of tiering pricing plans on monthly data allocations, unlimited data packages can be purchased with tiered limits of speeds. Customers can select the package which is best suited to the way in which they use their devices.

This approach is certainly an interesting one and certainly has the potential to disrupt the status quo. Vodafone is not the telco giant it once was in the UK. It sits third in the market share ranking for mobile subscriptions and is a comfortable distance away from the top two. However, a new approach to pricing might get the team back to its former glory days.

Brand O2 EE Vodafone Three
Market share 36% 33% 20% 11%

Statistics from Ovum’s World Cellular Information Service (WCIS)

With ‘Unlimited’ data plans, the tariffs are designed with 5G in mind. Vodafone UK CEO Nick Jeffrey pointed out that 5G is much more than a smartphone. A tsunami of devices will be connected to the network soon enough, and consumers will be digesting data in new ways; the last thing 5G consumers want to worry about is reaching a monthly data allocation.

“These tariffs are perfect for the over-the-top generation,” said Consumer Director Max Taylor.

Instead of tiering tariffs on consumption allocations each month, customers will be able to subscribe to download speed limits, with unlimited data pools. As you can see below, there are three tiers to take into consideration.

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Taylor suggested each of these tiers have been designed with experience in mind. The slowest, with a maximum speed of 2 Mbps, is for those who do little more than message, browse the internet or distract themselves on social media. The next tier is for those with an average data appetite; 10 Mbps is more than enough to run SD video on the go, while the final tier is for the heavy data consumers, gamers for instance.

Although this is a very interesting approach for Vodafone, what is worth noting is this is not the first time this pricing structure has been used. Elisa in Finland has been tiering its data plans on speed limits for years, but this should not take away from what is a very interesting switch from Vodafone.

“Vodafone’s move into unlimited data and its decision to price 5G the same as 4G indicate the emergence of a challenger mentality,” said Kester Mann of CCS Insight. “This is in sharp contrast to its traditional premium-focussed approach. It could spell bad news for Three, which has built a strategy based on challenging industry norms.”

One party which will not be happy with the news is Three. Over the coming months, the ‘challenger’ telco will be launching its own 5G proposition and we suspect it might be brewing up its own disruption. As Heavy Reading’s Gabriel Brown noted to us at the launch event, such an announcement from Vodafone might ‘steal some of the wind from Three’s sails’.

What is worth noting is the ‘Unlimited’ tariffs will only be available for SIM-only customers. You can see the pricing tiers for subsidized handset contracts at the bottom of the article, there is some opportunity for competitors to undercut Vodafone.

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Finally, Vodafone is taking a page out of the BT playbook by tackling the connected everywhere challenge. In launching its ‘5G Gigacube’ FWA product, the team are also supplying a convergence tariff to allow for seamless connectivity everywhere and anywhere. And for £50 a month, with an Amazon Alexa smart speaker included in the bundle, it is an attractive proposition.

Like Three, Vodafone is looking to challenge the traditional home broadband market. The FWA offering doesn’t need a landline or an engineer to hook-up the equipment, it is a simple and cheap alternative to fixed broadband. With home and mobile broadband, both 4G and 5G, bundled in with an Amazon Alexa for £50 a month, this might turn a few heads.

If Vodafone is to make moves in the UK connectivity market, it needs to do something different. This is what the last couple of years have all been about, turning the oil tanker. It now has a new converged network, Redstream, more legacy IT systems are being switched-off each year, nine more in 2019, and the financials have returned to growth for the first time in five years. When you add in the new pricing model, convergence strategy and innovation hubs to bolster the enterprise business, things are looking positive for Vodafone.

After giving up its market-leading position years ago, Vodafone is starting to look like a business which can challenge at the top of the UK connectivity market once again.

Vodafone pumps Manchester for 5G ecosystem development

In a few weeks’ time, Vodafone will become the second telco in the UK to switch on its ‘5G’ network, but up in Manchester, the team is focusing on ecosystem development.

At an event dubbed ‘Go Beyond’, the Vodafone team launched its Digital Innovation Hub in an attempt to help the next-generation. This is perhaps one of the important facets of 5G which is missed in general discussions; 5G isn’t just about speed, its about offering new tools to innovators to create services which would not be deemed possible on 4G networks.

“The Digital Innovation Hub is an example of how we are empowering today’s start-ups and small businesses with the expertise and technologies to help turn their blueprints into reality,” said Anne Sheehan, Business Director at Vodafone UK. “Our 5G services can help UK start-ups become global leaders in their fields.”

For the telcos, being first to launch 5G offers a competitive edge in the utilitised world of connectivity, and also bragging rights, but there is a bigger win for the economies and societies which drive forward the fastest; the opportunity and ability to get a jump start to create services which will define the technology world of tomorrow.

This would appear to be one of the objectives behind the innovation hub opened here by Vodafone; put the technology in the hands of start-ups and entrepreneurs.

“Such investment and commitment from the private sector supports our ambition to make Salford one of the world’s most attractive cities for digital enterprises,” said Paul Dennett, City Major of Salford.

“It will also boost the local economy and help attract new jobs and opportunities for the people of Salford, Great Manchester and beyond. This commitment also further strengthens Salford’s Innovation Triangle connecting MediaCityUK with the University of Salford and Salford Royal Foundation Trust, our outstanding and leading hospital in the City.”

Think about the impact which 4G had on yesteryear and today. Many of the countries who were the first to launch 4G networks created some of the most influential technology companies in the industry today. Prior to 4G, Uber, Spotify, Tencent, Alibaba or AirBnB didn’t exist (or did but weren’t anywhere near at full scale), but with the new connectivity buzz, new jobs, wealth and segments were carved out.

Arguably the UK missed out on this craze. It was the 28th country to launch 4G networks, and while it maintains a healthy position in the technology standings today, other nations who were quicker to the finish line reaped greater benefits.

5G isn’t just about going faster, it is about having the opportunity to create services which are not conceivable today. But to do that, the networks need to up and running. With all four of the MNOs planning to launch 5G this year, and each taking a slightly different geographical rollout plan, the UK has an opportunity to capture the new revenue created through the upgraded networks.

The UK currently accounts for around 35% of all European unicorns created over the last few years, while the technology sector has outpaced average GDP growth by 4X since the European referendum. The technology sector is on the up in the UK, but 5G launches and scaled deployment are critical to ensure this position is not eclipsed by other nations.

Telcos complain about auction as German regulator bags €6.5bn

With 41 blocks available in the 2 GHz and 3.6 GHz bands, this spectrum auction has proved to be a busy one for Germany, but it certainly is a profitable one also.

Lasted 52 days and consisting of hundreds of different bids in what appeared to be a frustrating process, the German regulator will pocket €6.5 billion. It seems Deutsche Telekom and Vodafone were having the biggest feud, sending the total expenditure considerably north of the €3-5 billion expectation.

Sitting at the top of the pile, Deutsche Telekom spent €2.2 billion, while Vodafone contributed €1.9 billion. Telefonica spent €1.4 billion and up-start Drillisch wrote a cheque for €1.1 billion as it searches for a means to break the dominance of the three MNOs.

“Vodafone is committed to bring the full benefits of a digital society to Germany through our gigabit network including 5G,” said Vodafone Group CEO Nick Read. “We believe it is important to have a balance between the price paid for spectrum and our strong desire to create an inclusive society through investment in mobile network coverage.”

And while Read’s comments are as bland as you would expect for a press statement, there have been grumblings elsewhere over price. Deutsche Telekom has said the process has left a ‘bitter taste’.

“The network rollout in Germany has suffered a significant setback. The price could have been much lower,” said Dirk Wössner, Member of the Board of Management of Telekom Deutschland.

“Once again, the spectrum in Germany is much more expensive than in other countries. Network operators now lack the money to expand their networks. With the auction proceeds one could have built approximately 50,000 new mobile sites and close many white spots.”

Deutsche Telekom has secured 4 frequency blocks in the 2 GHz band and 9 frequency packages in the 3.6 GHz band. Vodafone on the other hand has purchased four different blocks in 2 GHz, and one continuous block of 90 MHz in the 3.6 GHz spectrum band. Telefonica collected two paired blocks in the 2 GHz band and seven unpaired blocks in 3.6 GHz.

Although Telefonica feels it can maintain its market share leadership position in mobile following this auction, it also felt the need to vent over a frustrating couple of months.

“We remain convinced that frequency allocation via auction was counterproductive for the expansion of mobile communications in Germany,” said Valentina Daiber, Chief Officer for Legal & Corporate Affairs at Telefónica Deutschland.

“The course of the auction showed that the design as well as the insufficient amount of available frequencies drove up the costs. From the consumer’s point of view and for Germany as a business location, these investment funds would be much better spent on network expansion.”

The telcos will certainly be glad they have a bit of breathing room from the auction process now, though the relationship between the regulator and industry seems to be turning very sour.

Spain pitches for connectivity leadership with Vodafone 5G launch

Spain is not often mentioned when discussing the leaders for connectivity in Europe, but it does seem momentum is gathering pace in the country.

The most recent announcement will see Vodafone debut its 5G offering in 15 cities, the first to hit the on-switch in Spain. The Spanish business is also sneaking in just ahead of the Brits in the internal Vodafone race. Quoting speeds up to 1 Gbps, the hope is to be up to 2 Gbps by the end of the year.

And its not only the mobile side which is demonstrating some interesting trends. Looking at the fixed broadband segment, Spain is one of the leading nations when it comes to fibre penetration. According to the latest statistics from the Fibre to the Home Council Europe, 44% of Spanish citizens subscribe to FTTH broadband services, with only Latvia and Lithuania ahead of the country.

One of the issues which Spain will face is the digital divide however. This is a challenge which is unavoidable across the country when you take into consideration its size. At 498,468 km², it is the third largest by geography (fourth if you include Russia) and the seventh largest by population.

This perhaps makes the 44% fibre uptake more impressive, though there will still be those in the countryside who perhaps feel underserved. However, Movistar, one of Telefonica’s brands, has suggested it hopes to have 100% fibre coverage by 2024. This ambition is dependent on the availability of public funds, but should all the pieces fall into place, it will achieve the milestone almost a decade ahead of the UK.

Five years is a long time to wait if you are struggling today, therefore there are various options including WiMAX, satellite and fixed wireless access over 4G products available today. For a country which is scarcely mentioned as the leader in the European connectivity rankings, it does seem to have the right blend when satisfying the insatiable data diets of its citizens.

Looking at the 5G race, Vodafone España is certainly putting itself at the front of the pack with a timeline geared towards June 15. What is also quite impressive is the breadth of the launch. 15 cities on launch date is an impressive haul, and while the coverage might be limited it does give the telco the first step to build outwards and onwards.

Once launched, Vodafone España claims the network could provide latency of less than five milliseconds. For the man-on-the-street, this will mean little, though it will give the technologists the opportunity to explore new services in for real-time applications such as autonomous vehicles, tele-medicine, VR, 8K video and cloud gaming.

This is the most important aspect for any 5G network; it has to have scale. Not only do you have to meet expectations for those who are paying for 5G connectivity, there has to be enough coverage to beta-test and eventually launch new services. The countries which reach this scale the quickest, will give their innovators the best possible start to create the 5G-specific services and applications.

This is not to say they would dominate the market in the way Uber did with the introduction of 4G but having months (or perhaps years) more time to create and hone an offering would certainly be an advantage.

The Spaniards might be guilty of the odd siesta, but they certainly haven’t been sluggish when it comes to getting 5G up and running.

UK telcos ask for clarity sooner rather than later over Huawei – report

The UK’s largest mobile operators are reported getting tired of Government indecision, drafting a letter to Cabinet Secretary Mark Sedwill requesting clarification on the situation.

The BBC is claiming to have seen a draft in which a decision has been urged. As it stands, the MNOs are in the telco version of purgatory. The 5G world is fast approaching, but with the Government getting comfortable on the fence, no-one will want to make any investment decisions, a wrong-turn could prove to be very expensive.

In response to the rumours of such a letter, the UK Government has asked for patience.

“The security and resilience of the UK’s telecoms networks is of paramount importance,” said a Government spokesperson. “We have robust procedures in place to manage risks to national security and are committed to the highest possible security standards.

“The Telecoms Supply Chain Review will be announced in due course. We have been clear throughout the process that all network operators will need to comply with the Government’s decision.”

What is worth noting is the BBC coverage perhaps reflects a sense of urgency which is not felt by the telcos. Having reached out to contacts in the industry, the tone of urgency which has been reflected in the article does not seem to represent the climate for the telcos. It is a sensitive issue, and the message seems to be clear; we’re not going to force the hand of the Government into a speedy decision.

“We do not comment on draft documents,” said a Vodafone spokesperson. “We would ask for any decision regarding the future use of Huawei equipment in the UK not to be rushed but based on all the facts.”

“We are in regular contact with UK Government around this topic, and continue to discuss the impact of possible regulation on UK telecoms networks,” said a BT spokesperson.

That said, a decision needs to come sooner rather than later.

Currently the MNOs are in a bit of a bind. Money needs to be spent and networks need to be built to ensure connectivity in the UK meets the standards demanded of the digital economy. However, as there are so few vendors in this segment of the industry clarification on the Huawei situation is critically important.

Without Huawei, the threat of decreased competition might lead to less attractive commercial terms, which could lead to increased prices for the consumer as telcos drive ROI. Telcos will want Huawei to be included in these talks. Right now, no decisions can be made. If the telcos go forward without Huawei, they might be missing a trick, but if they do and the Supply Chain Review bans the firm, the cost of ‘rip and replace’ would be painful. The telcos are just sitting and waiting.

The outcome of the review has already been potentially leaked, suggesting Huawei would be given the greenlight. This leak from the National Security Council led to former-Defence Secretary Gavin Williamson being sacked, though this is not to say the leak is accurate. Last week, the UK hosted US President Donald Trump, and while there was no eureka moment, who knows what was discussed behind closed doors.

The US is sticking by its anti-Huawei position and has even suggested with-holding access to security data from countries who are exposed to the vendor.

That said, there might have been no material conversations held on this topic over the course of the visit. Theresa May is no-longer the political leader of the UK and Trump might have thought it nothing more than a waste of hot-air. This is perhaps one of the biggest issues which the country is facing at the moment; who knows who is going to be leading the Government over the next couple of months.

The Tory party members are going to be choosing the next leader of the Conservative party over the next few weeks, and the tone of 10 Downing Street might change. May seemed to have a much more internationalist approach to politics, though certain candidates are much cosier with the White House. Bookies favourite Boris Johnson is certainly chummier than most with the US President, though others will be in deeper conversations with US delegations than some. This could have an impact on the relationship with China in the long-term, and subsequently, on any decisions made surrounding Huawei.

The consequence of this decision is not only impacting the future of networks in the UK, but also the past. Yes, telcos are reluctant to spend now, but any decision banning Huawei would result in ‘rip and replace’ programmes. Vodafone has already stated it has Huawei equipment on 38% of base stations around the UK and having to replace RAN equipment would set its 5G ambitions back two years. Telcos would also have to consider 4G investments made over the last couple of years.

Although the other telcos have not been as forth-coming with their exposure to Huawei equipment, it would be a fair assumption the vendor’s kit is scattered throughout the network. This is not just a challenge for Vodafone or EE alone, this is an industry-wide worry.

This is not to say the UK would turn into a massive not-spot, but it would have severe implications on the connectivity ambitions of the country.

Some might have expected a decision from the Supply Chain Review in May, but we are still waiting. External factors have perhaps taken priority, the next Prime Minister and the Trump State Visit for example, but that will come as little consolidation for the telcos who are prepping investments.

The UK should not rush this decision, but the longer it leaves the telcos in purgatory the more the country slips behind in the 5G race. Uncertainty is the enemy of telcos and who knows which way this decision will go.