Dropped customers: Vodafone loses 375K

Vodafone Hutchison Australia has revealed that it shed 375,000 mobile customers in the first half of 2011, reducing its customer base to 7.2 million. The company blames, in part, its highly publicised network coverage issues.

In what CEO Nigel Dews admitted was a "challenging six months", Vodafone lost the vast majority from its prepaid customer base. The telco shed 347,000 prepaid customers, although 78,000 of the lost customers were attributed to an adjustment in the way the telco reports its customer base.

The poor results for Vodafone impacted on the profits of half-owner Hutchison Telecoms, leading to a loss for the half to 30 June of $78.2 million, down from a profit of $17.9 million in the same period in 2010.

Dews said that this was driven by the combination of a $15.6 million decrease in interest income, following the repayment of shareholder loans by Vodafone Hutchison Australia in 2010, as well as the poor profitability of Vodafone after the "network and customer service issues experienced by some customers in late 2010 and early this year".

At that time, customers fled in droves because they were unable to get adequate voice or 3G coverage, which caused a spike in complaints to the Telecommunications Industry Ombudsman, with the telco's churn rate peaking at 2.2 per cent. Dews said in May that this had gone down to 1.8 per cent, but, in the company's latest briefing, he would not confirm the current churn percentage, except to say that it was "below 2 per cent".

Dews also blamed Telstra's use of aggressive marketing for prepaid mobile products for the drop in Vodafone's prepaid customer numbers. According to Telstra's third-quarter reports, it had added 1.2 million prepaid and postpaid mobile customers, while rival Optus had added 709,000. Dews also said many customers were giving up prepaid accounts in order to switch to smartphones, which now account for 52 per cent of Vodafone's handset base.

Vodafone announced earlier this year that it had recruited Chinese network vendor Huawei to overhaul its 2G and 3G networking equipment as a response to network issues. Dews said that the network revamp was progressing, with 292 sites overhauled and 4000 sites expected to be completed by year's end.

"Having started our network replacement in the Newcastle/Hunter and Central Coast regions, we have also commenced network equipment replacement in Canberra, Perth, northern New South Wales and Tasmania," he said.

On the company's 850MHz 3G upgrades, Dews revealed that the company had gone live at 788 of the 1500 sites to be upgraded and expected 1000 to be live by the end of 2011.

Dews said he was confident that the network could meet customer's needs.

"We've got the confidence now. Our network is getting better and stronger all the time, and what we don't have, we make up in value," he said.

Dews said Vodafone would seek to "respond responsively and quickly" to its customers, with "no surprises" and would seek to "delight customers with innovation". In terms of winning back customers, Dews said customer contracts are expiring all the time, and the telco would be in a position to grab some of its rival customers as that happens. He said that based on July figures, he believed Vodafone was back on track.

"We're happy in our performance in July and ... operationally I think we've turned the corner," he said.