Vodafone cautious about emerging markets expansion

CEO says UK-based operator will concentrate on existing assets

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By  George Bevir Published  May 19, 2009

Vodafone will concentrate on its existing operations before it expands into more emerging markets, according to the operator’s CEO.

Over the past two years, the UK-based operator has pushed further into growth markets with the acquisition of operators in, India, Ghana and Turkey.

This year, it also purchased a licence to establish the second mobile operator in Qatar, while also boosting its stake in South Africa’s Vodacom.

But it appears as though the days of buying controlling stakes in existing operators and snapping up licenses in developing markets could be over.

Chief executive officer Vittorio Colao praised the performance of some of the firm’s recent acquisitions, but he said that for the rest of the year the priority would be extracting further value from current operations.

Colao said: “Whilst emerging markets are of interest to us, we remain cautious and selective on future expansion. Our primary focus will remain on driving results from our existing assets.”

Expanding into emerging markets is a tactic that has helped it Vodafone become the world’s leading operator by revenue.

The operator’s latest set of results, released today, show that while its European operations are suffering from slower growth, those in the emerging markets are performing well.

Vodafone said that it had been affected by consumers in Europe making less calls and sending less text messages, while continued double digit price declines had also had an impact on revenue.

Redundancies have also taken their toll on the operator, with reductions in staff levels causing a slowdown in enterprise growth.

In contrast to Europe, results in Africa and India were “robust”, thanks to continued but lower GDP growth and increasing penetration.

Revenue from the Asia Pacific and Middle East region grew by 32%, compared to 14% in Europe and 11% in Africa and Central Europe.

The growth in Asia Pacific and the Middle East was driven mainly by the fast growing market of India, where Vodafone added 24.6 million subscribers during the 2009 UK financial year.

However, the group’s Turkish operation was singled out for criticism, with its performance described by Colao as “disappointing”.

Over the last year Vodafone Turkey lost 215,000 customers, which the operator attributed to a higher rate of churn, caused partly by the introduction of mobile number portability.

Vodafone Turkey will now concentrate on “network quality, distribution and competitive offers”, according to the CEO, with further investment next year when a re-launch of the operator is planned.

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