In our (internal) news wrapup today that we get sent about Vodafone, the tone was unremittingly dire. Comments from last week by members of this list were equally harsh. While I don't reperesent Vodafone in any way, shape, or form, I would like to respond to some of the things that are being said.
Arnold P. Siboro said:
>When you are late to market, have less feature and less users/less
>contents, what else can you promote?? Global standard! :D
>
>But really, Vodafone VGS with its W-CDMA/GSM handsets are the most
>globally usable phones at the moment. Gaijins are especially happy with
>this, but more and more Japanese are realizing that Japanese carriers
>are purposely limiting their rights to use the phones outside Japan.
>
>If only I can keep my number, I'll switch from my current au to VGS..
>gotta wait number portability goes into effect next year..
I agree that global standards have not proved hugely attractive in the market. What should (eventually) be attractive to our customers is that with global Vodafone purchasing muscle, the range and variety of 3G handsets can compete with DoCoMo's both on price and variety/quality. As a minority carrier with less purchasing power, this is not something we could say without our parent's backing and purchasing power. Now, I think that there is a valid question as to whether we can be competitive with DoCoMo in those details that Japanese consumers seem to prefer (resolution and variety of icons is one example) using global handsets.
au is a different case, since nearly 100% of their handsets use the same Qualcomm chipsets, as do nearly all CDMA handsets in every other market in the world. The model is quite different: The cost of handsets, whether built in Japan or Guatemala, is largely a function of the cost of the royalties for the reference designs and chipsets paid to Qualcomm. Because of this, the economies of scale that can be realised is less than in the GSM/UMTS world, where a variety of makers, chipsets, RTOS', etc. make getting deals from handset makers and realising economies of scale more possible. The costs are not low, and in typical Japanese fashion, au has piled on a number of additional functions for their handset makers, meaning that, yes, they have very full-featured handsets, but the cost of subsidising those handsets is quite high. Ditto, DoCoMo, because all of their FOMA handsets are produced specifically for them, and the cost is likely significantly higher than what we pay.
The reporting, the internal and external comments about Vodafone K.K., always focus on market share, where we have been failing. No doubt. But which is the most profitable Vodafone operating company in real terms? You guessed it, VFKK. What many people in our own company, and seeminly 100% of the people outside of our company seem to miss is that profits derived solely from subscriber growth amid falling ARPU are no longer possible: Subsidising handsets at the current levels will no longer be possible; growth in revenues will require better supply chain managment and purchasing; boutique phones, which almost all PDC models essentially are, catered to a very limited production run for a very specific market, will no longer be feasible, except as a base from which to develop global products.
There is a definite cultural gap: As a NYSE-listed company, a lot of importance is placed on how profitable we are, whereas in Japan and the media the focus is overwhelmingly on market share. Neither are absolutely correct views, since they are closely related to one another: Without market share, no matter how lean we are, our profits will be below expecations; without profits, we are not providing proper value to our shareholders.
Darren Luckett said:
>s true that they are the most globaly useful, but the vodafone range is
>18 months behind the docomo devices. vodafone have normalised the japan
>and rest of the world market as the 802se is the v800. my friends in
>europe are shocked. they thought japan would lead as docomo and au
>does.
>vodafone global may be good for foriengers, though personally the
>n900iw is a better global phone , but not for japan in the eyes of the
>mobile rest of the world. thank god for docomo and au.
Darren,
If you don't mind me asking, in what way is the Vodafone range 18 months behind DoCoMo? The battery life on our new handsets is significantly better than anything DoCoMo had 18 months ago, the weight and features, including 2 megapixel cameras, is equivalent to models that DoCoMo released about 5-6 months ago, I would admit, while our Java features, I should add, are basically superior in terms of adherence to the CLDC/MIDP profile, while at the same time including classes to achieve certain other functionalities, and the Bluetooth support of several of the handsets is not something that I am aware any DoCoMo models of having. The issue with WCDMA/UMTS networks have been, up until this point, the lack of compelling handsets. DoCoMo was willing to subsidise over 60,000 yen per handset to have bragging rights as the worlds first and foremost WCDMA carrier. We were not. See above for my comments concerning the balance of profitability and market share. With our network, the story is similar: DoCoMo paid a huge premium for it's FOMA network, one, incidentally, which still does not adhere to all of the IMT2000 standards. We have spent significantly less, and if you look at our coverage as compared to DoCoMo's two years on into FOMA, I think we compare favourably. Certainly, there is an issue with coverage. DoCoMo had the same issues early on, because, as has been pointed out, we are rolling out an entirely new network, versus au's backwards-compatible CDMA 2000 1X network, or our European bretheren's hybrid GSM/UMTS networks which allow the existing GSM networks to pick up the slack where there are UMTS coverage gaps. No doubt about it, this is an issue for us, but one that is to be expected. I have been monitoring the network since joining, in 2003, and can say that it has gotten very good in the two years I have been here. Can it get better? Absolutely. But this is always going to be an issue if you roll out an entirely new network.
I don't think you need to thank god for DoCoMo or au, you can thank a monopoly system which created both companies. As a former DoCoMo customer, and the author of a book about i-mode, I find plenty to admire about that company, and I think that, to some extent, they have earned their market share with significant innovation and customer focus. As a former IDO and KDD customer, and an extremely disgruntled one at that, I find very little to explain how they got to the point they are presently at without going under, except to explain it as very clever use, in early days, of U.S. trade representative pressure, which they later again put to good use in getting the ministry of posts to approve their use of CDMA, which turned out to be a more mature technology with a significantly less painful and less expensive upgrade path. That, and a growing market, insured that even IDO could succeed. Ties to politician Ichiro Ozawa, didn't hurt IDO either. To give them proper credit, in the last three years they have really gotten their act together, and are a respected competitor.
In our case, we got ahead because we did better than our competitors, even with certain competitive handicaps which favored DoCoMo and au: No access to the 800 Mhz bandwidth is a big one, but so were unfavorable connection fees, as well as other factors. We got to where we are not by being the mature, staid, play-it-safe company that both IDO and DoCoMo were, but by being innovative, creative, young, and nimble. We could do that partially because actually we were not one company, but nine very small companies, able to move quickly, if not always in concert. Who was first with e-mail connectivity? Who rolled out the first mobile content service in Japan? Which company came up with Sha mail? Which is the only company to build a successful pre-paid business in Japan? You guessed it: J-Phone/Vodafone. But once we reached a certain size, the problems with our inability to function as one company, and one brand, and our duplication of many efforts across the 9 operating companies, outweighed the benefits, and we have become a bigger, and to some extent more conservative company. We could very well have ended up like Tuka, which stayed young, small, and will be lucky to be around in a year or two.
That there have been pains growing into one national company goes without question. That there has been even more pain growing into a global company is manifest in recent results. But to dismiss Vodafone, or speculate, stupidly, that Bill Morrow is being sent here to sell us off, as one 'analyst' did, is silly: What business is Vodafone in? An investment fund? No! Unless they planned to buy DoCoMo, which is basically not conceivable, since NTT owns a controlling majority, and it would be suicide to sell a cash cow like DoCoMo, I cannot conceive of any possible scenario under which Vodafone would sell Vodafone K.K. Sorry, a bit off the original topic, but so were the two posts that I was responding to. Nothing is ever as simple and black and white as DoCoMo and au are great and Vodafone sucks. We clearly face a big challenge. We are in a business where falling ARPU has always been offset by subscriber growth, and we are currently not growing.
The news of our demise, however, is very premature. Very.
Best from Nik
Received on Mon Feb 14 08:29:39 2005