On Monday, June 17, 2002, at 11:12 , Gerhard Fasol wrote:
> Vodafone does not seem to listen to Benjamin
> regarding handset subsidies:
>
>
> : Vodafone tumbles on Japan price cuts
> :
> : Saturday, June 15, 2002 at 10:00 JST LONDON (Reuters News)
> : Europe's biggest mobile phone operator, Vodafone Group Plc,
> : raised investors' hackles on Friday by revealing its Japanese
> : mobile phone business had raised subsidies on handsets to meet
> : competition.
At the peril of getting flamed - we had this very same discussion last
year - the Japanese market is in economic terms less mature than the
European market. In Japan, Voda is still fighting for market share
(hence subsidies) in Europe they are fighting for profitability as they
have already won their market share by and large.
Subsidies make sense (they are an investment like radio towers) when you
go for expansion in a market that still has room for expansion. However,
at some point you hit a wall (near saturation) and then the investment
nature of subsidies disappears.
The argument that subsidies need to continue forever in order to replace
older with newer technology doesn't really bite. Any other industry is
very well capable of replacing old with new technology without
subsidies. So will the mobile phone industry once it has come out of its
gold rush phase. The problems telecom companies have getting funding and
tumbling share prices are an indicator that this phase is by and large
over now.
Investors now want to see a return on that market share that has been
purchased with their investments. If Voda manages to increase their
market share in Japan within the generally accepted price band
(typically 400 to 500 USD per sub) their shareholders will probably go
along with that, but eventually they will want to see Voda reducing
subsidies in Japan too.
Thus, it is not even clear if Chris Gent doesn't get his butt kicked for
this, but I think if it is confined to J-Phone only, shareholders will
probably go along with it for now.
regards
benjamin
Received on Mon Jun 17 09:30:04 2002