Vodafone Australia calls out mobile competition inequity

Vodafone Australia calls out mobile competition inequity

Summary: Vodafone Australia CEO Bill Morrow has called on the Australian government to make competing in the mobile sector against Telstra easier.

TOPICS: Telcos, Optus, Telstra

The combination of Australia's vast land mass and AU$450 million in government subsidies to Telstra over the past decade has made it difficult for competition to thrive in the mobile market, according to Vodafone CEO Bill Morrow.

Vodafone CEO Bill Morrow
Vodafone Australia CEO Bill Morrow
(Credit: VHA)

Morrow, in his first major public speech since becoming CEO of the troubled telecommunications company earlier this year, told the American Chamber of Commerce lunch in Sydney today that he isn't making excuses for the company's well-publicised struggle following its network issues stemming back to 2010, nor is he seeking government favour for Vodafone.

"[It's] not going to correct Vodafone's issues by a long shot, it's not going to correct those issues. We're doing things to address our network. [We have] been aggressive about building out a network that makes sense for the digital revolution, about changing the service levels when you call into a call centre, walk into a store, or jump online," he said.

"Those things we're fixing, those things are our responsibility. This is a broader issue that has a longer time horizon associated with it."

Morrow said that Telstra's incumbency in the fixed-line business — where its profit margin is high — along with AU$450 million in government funding over the past decade to build mobile infrastructure and AU$880 million in universal service obligation funding make Telstra difficult to compete against.

"If you look at taxpayer subsidies going to promote the lack of competition, AU$450 million of taxpayer money was spent. You could argue [that] if the government is going to take money from each of us, why wouldn't they do it in a way that still gives us a choice?"

Morrow again highlighted the recent deal with the Western Australian government awarding AU$39.2 million to Telstra earlier this year to improve mobile coverage in regional and rural areas as one such example. Telstra, however, has pointed out that this contract was awarded after a tender process in which Vodafone did not participate.

Morrow said that in a land mass where there is an average of three people per square kilometre like Australia, it is difficult for mobile-only companies like Vodafone and Optus to justify the expense of rolling out infrastructure right across the country. He said that Telstra doesn't face this problem.

"If you're a fixed-line company that has enormous profits, you don't need to make that independent decision for your mobile business; you make it on behalf of the overall portfolio of your companies," he said.

"So while I'm rich on the fixed-line side, I can afford to do things that [burn] my capital on the mobile side. I want to commend those guys over there that are doing this. I would be doing the same thing; that's the obligation of those executives for their shareholders."

He said that the National Broadband Network (NBN) roll-out is "fabulous," but that he would not debate whether fibre to the node or fibre to the premises is the better method. He said that it would bring an opportunity for competition, but that the NBN needs to be used for backhaul for mobile services.

"Bring it in where the backhauls need to be. Lower that lease-line cost; Australia is off the charts in lease-line cost."

In its defence, Telstra's group managing director of corporate affairs Tony Warren told journalists this morning that Telstra has invested a total of AU$3.5 billion in the mobile network since the launch of Next G.

"We think getting to the position we're in today took a lot of capital, and some really big judgment calls on our part," he said. "We did it because we were not performing where we should have been in the mobile industry, and competition forced us to keep stretching ourselves to provide the best service to customers."

Warren said that Telstra believes it is operating on a level playing field and competing against two large multi-national telecommunications companies: Vodafone and Optus.

Morrow said that while the global Vodafone company and its co-partner Hutchison does give the Australian joint-venture company access to best practices, the tyranny of distance means that it can't leverage the global company to save on cost in the same way that some of the European Vodafone brands can.

Topics: Telcos, Optus, Telstra


Armed with a degree in Computer Science and a Masters in Journalism, Josh keeps a close eye on the telecommunications industry, the National Broadband Network, and all the goings on in government IT.

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  • Vodafone Australia calls out mobile competition inequity

    "along with AU$450 million in government funding over the past decade to build mobile infrastructure"

    All of which went to public tender and was awarded to the mobile company that offered the best return for the government dollar spent.

    If Vodafone didn't tender, they have only themselves to blame. If the did tender and lost, they can only blame their own greed by not offering a value for money response.

    "AU$880 million in universal service obligation funding"
    This money is offered as PARTIAL compensation for providing and maintaining unprofitable services.
    If Vodafone do not like the money going to Telstra, they are at liberty to lobby the government to take on this responsibility themselves.
    If they don't like that idea, they could lobby the government to amend the law in order to obligate ANY Telco asked to provide a USO service to any customer at the standard schedule rates regardless of the actual costs incurred negating the need for a USO levy.
    Since they have never lobbied for either, I can only conclude that, privately, they are more than happy to dodge any actual OBLIGATION to provide service.

    "Morrow again highlighted the recent deal with the Western Australian government awarding AU$39.2 million to Telstra earlier this year to improve mobile coverage in regional and rural areas as one such example."

    Yes, follow the link. The very first line reads:
    Telstra has WON a TENDER it was gunning for to expand the mobile phone coverage in Western Australia.

    If Vodafone wanted it so bad, why didn't they offer a better tender than Telstra. Did they even bother to tender at all?
  • VHA real woes

    VHA real woes occurred right around when the GFC struck. The word around town was the parent company reduced CAPEX across the board by multi-billion dollar amounts. At the same time starved for capital the parent company authorised the deal to create VHA (voda-hutch australia). Hutch had customers and VHA a network but of course they had to combine their billing systems.

    What they didn't realise like all execs is that the heart of a real Telco isn't the network, its the billing engine.

    With the billing migration underfunded, ill-concieved and with high expectation the newly formed executive along with the idiots who conceived of "Three", that wonderful exercise in marketing, ignored all of the warning signs. Who cares when you have such a massive market share eh.

    The billing migration was a nightmare. Duplicate call charges, missing usage, incorrect charges and other errors it was, from what I heard and saw, an utter nightmare. So imagine an environment where your living off of your revenue and bam all of a sudden you have issues billing and collecting?

    Of course what little money VHA had went either to marketing (mainly) or the billing migration, nothing for the poor ole network. I can't believe in Metro Sydney they were still running 2G and upgrading their 2G network.

    VHA struggled to maintain its market share and thus pushed with a host of "unlimited" products (read dirt cheap with terrible contention ratios). Stupidly VHA attempted to corner the wholesale market with products mopped up as much the spare capacity with products that had terrible contention ratios then the retail ones....like the ones Amysim bought up.

    So imagine a company, struggling internally with a nightmare billing migration. Struggling to bill properly, whilst at the sametime hundreds of thousands of new activations are smashing the layer 1 part of the network and internal system. Sure they bought some more IP backhaul but when your layer 1 is mainly 2G with a little bit of 3G here and there, that extra bandwidth ain't gonna cut it.

    All this builds a picture. VHA found/finds itself in. No CAPEX for 4G, or the spectrum. Network wounded and in bad shape (god forbid its reaching the end of its useful life). No ability to acquire a competitor. Market share dropping and no fancy product wizardry to convince people twice burned now (once with three and now with VHA) and a competitor who is now off the leash with competitive products and pretty new colours. Network utilisation high and maybe some capital to upgrade the network in key markets but not enough for the future.

    One last point; Seriously I don't know where Warren gets off claiming 'lease line' (can't even get the product name right) is expensive. IP bandwidth is sitting at below $50mbps these days for the big players. When I started they were $1500 per mbps, and what's more laughable is how his exec team don't even think out the box. What about all those utilities that built fibre loops for their management systems, that use of all 0.001% of the bandwidth? VHA could be building towers all along the rail transport corridors which have fibre running down em, and under ground power conduits . but of course no, they just sit there and complain and whinge about a few hundred million that Telstra got to build networks into unprofitable areas (that are still unprofitable).

    Unless the parent company funds (the capex that they stripped out in 08/09/10) them to the tune of say $5-10b (NextG cost $10b) then I would have to say that VHA has no future in this country.
    • VHA woes..

      I have not read a bigger load of regurgitated manure in months. Chugs my boy, you should of just left it at VHA's woes because when it comes to discussing what they are, how they have played out, and whats next, you appear to be very much out of your depth.

      Wow.. what a load of crap ^^^^
      • vexatious comments

        so Xizor182 tell me exactly where i'm wrong? seems a little unfair that you call bullsh*t but fail to address any of the points I've raised.

        I know personally about the billing issues. I know personally about the layer 1 issues,

        Some other things are gusses but the lack of CAPEX to go 4G? Yep true there. Several friends, colleagues and peers have at one point worked for VHA. I know several of the wholesale relationships, especially at a senior level and have been involved multi-million dollar deals involving VHA. I've read more then several hundred wholesale and carrier contracts during my career. I know the inside pricing on all of the major telcos in this country.

        My gut tells me the fact that your slinging mud and not dancing shows that you know i've hit a few sensitive spots that never came out in the media. Journalist never ever go past the press release from the colouring department despite the fact that these telco's are just huge money pits where exec's are working tirelessly to strip as much out as they can before the sink it. Of course they're only to happy for the journos to help whenever they can.

        Take Paul Barry. The collapse of One.Tel had major issues that never saw the light of day and yet the public are lead to believe that his book is the complete story of woe to go.

        Things he failed to pick up. Missing data tapes filled with local call and Line Rental charges. Huge fraud with their outsourced cold calling and door to door sales groups. $40million contra's to PBL magzines via the Phone card group that never showed up in the books. $20m account level credits from Telstra to drop ULL access disputes at ACCC (hell I've still got the written proof for half of these).

        I personally love how certain teams were trading services for sex, money, food and advancement.

        I know my Telco Xizor182, do you?
  • Sol Trujillo all over again

    American flies in to save a local telco in decline and immediately points the finger at the government and tells them to change the rules (all said at the AMERICAN Chamber of Commerce). Sounds suspiciously like another American from a few years ago ... and we all know how that ended! If you talk to anyone working at Vodafone at the moment morale is rock bottom and with the recent sackings of over 500 employees there is no hope of rebuilding this business or brand in the market especially given that this CEO and his ring ins have been there now since the start of the year and he's still talking about the past. Reading his articles and his press he's blamed the shareholders for under investment, he's got rid of 100's and 100's of employees , he blames the government for a lack of competition ....... Compare the Vodafone CEO to the Telstra CEO and you can see why the companies are in such different states. How long did Sol last?