Vodafone's slower customer growth target pays off

Vodafone saw a modest bump to its full year 2019 earnings despite having to pause its pursuit of aggressive customer growth due to uncertainties around the government’s Huawei ban and the ACCC rejecting its proposed merger with TPG.

In its ASX announcement (pdf), the telco posted 6.9 percent EBITDA growth to $1.2 billion in the year ended 31 December 2019, up from $1.1 billion in 2018. In comparison, revenue is down 2.8 percent to $3.5 billion and net loss after tax more than doubled to $279 million.

Chief executive Iñaki Berroeta said Vodafone took a “disciplined” commercial approach. “In 2019, we managed the uncertainty by taking a deliberate focus on commercial stability, so we are pleased with our EBITDA result,” he said.

Acting CFO Sean Crowley said the telco was not in a position to take an aggressive approach to mobile customer growth in 2019.

“Facing an uncertain environment, we made a strategic decision to focus on maintaining our postpaid mobile base rather than pursuing aggressive customer growth,” Crowley said.

“We were pleased our postpaid mobile base remained steady, which we attribute to our strong network and value propositions such as Bundle & Save discounts and $5 Roaming.”

The prepaid side meanwhile was impacted by a cleanup of inactive customer accounts, which saw the culling of 94,000 accounts that have not been profitable. Vodafone also steered clear from marginally profitable or unprofitable prepaid channels.

The telco’s NBN customer base has more than tripled during the year, with 40 percent of customers connected to the 100Mbps speed tier.

“Overall, we are pleased to achieve our EBITDA result, mitigating the decline in revenue through careful management of our operating expenses,” Crowley said.

Looking ahead, the company is moving forward with its merger with TPG Telecom, following the recent ruling from the Federal Court approving the transaction.

“In 2020, we look forward to implementing the merger, subject to any ACCC appeal and further approvals, and delivering benefits to both VHA and TPG/iiNet customers."

“The merged company will have a strong balance sheet, significantly improved spectrum and transmission assets, and increased cross-selling opportunities. This will enable us to compete with confidence in the market and reverse the downward movements of 2019.”

Berroeta also revealed that the telco will be switching on its first 5G sites “within weeks”.

“We are very excited to be pushing ahead with our plans for 2020 by delivering our first 5G sites within weeks, with the initial rollout to continue throughout the year,” Berroeta said.

“These will be the first of over 650 5G sites in progress. Several thousand sites are to be built over the coming years, with the merger to enable acceleration.”