Vodafone banks on cost cuts and convergence

After announcing the biggest corporate loss in UK history, Vodafone is trying to reassure its investors with money-saving measures and plans for converged services
Written by David Meyer, Contributor

Mobile network operator Vodafone has launched a new push for convergence, after posting the largest corporate loss in UK history.

On Tuesday the company announced pre-tax losses of £14.853bn, which it largely blamed on writing down the value of its German subsidiary Mannesmann.

Job cuts appear inevitable following such a huge loss, but on Tuesday morning a spokesperson for Vodafone would not be drawn on exact numbers. He did however indicate that the bulk would be contractors.

In the meantime, Vodafone's New Businesses unit will begin offering fixed-line broadband in the German market, and a spokesperson confirmed to ZDNet UK that such services would be making its way to the UK.

"It will be done by acquiring capacity and reselling capacity," he said, adding that suppliers had yet to be selected.

Tuesday's announcements also indicated a focus on the "integration of mobile, PC and the Internet at the application level". This coincided with the news that Vodafone would be outsourcing its IT Application Development and Maintenance activities to save costs.

Vodafone's spokesperson confirmed that instant messaging (IM) would be a key part of this drive towards integration. The company is one of the fourteen operators who are working towards an interoperable mobile IM platform.

He suggested that this interoperability would not be "much of a problem", but declined to give a timeframe for the client's release.

The spokesperson also indicated that Vodafone's Zuhause (At Home) service, which gives German customers discounted phone usage whenever the cell ID network identifies them as being at home, would find its way over the UK in the next 12 months.

Family plans, allowing discounted rates for calls between family members, are also likely to appear soon, as will other bundle-based tariffs.

One announcement likely to appeal to Vodafone shareholders was a one-off dividend of £3bn, on top of the £6bn that investors are already expecting from the company's sale of its Japanese operations.

Ovum telecoms analyst John Delaney told ZDNet UK the announcements represented a "promising start to [Vodafone Group CEO Arun] Sarin's proper tenure".

"He's clearly now calling the shots," Delaney said on Tuesday, adding that the announcement combined "crowd-pleasing stuff" for the shareholders with a sensible long-term outlook.

Delaney said reselling a fixed-line broadband package was a good decision for Vodafone at the moment, as there isn't a suitable UK Internet service provider that the company could acquire. However, he warned: "If you're getting into value-added broadband like IPTV, then it's a different matter."

By Tuesday lunchtime, Vodafone's share price had risen 2.5 percent on the back of the company's announcement.

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