FutureFive NZ - Telecom and Vodafone shedding 4000 mobile connections a week

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Telecom and Vodafone shedding 4000 mobile connections a week

To put a telecommunications slant on a famous phrase: there are lies, damned lies, and mobile phone connection statistics.

A telco’s connection count doesn’t necessarily mean much – at least not without some context. Are the connections ‘active’ and how much revenue is each connection generating? What percentage are post-paid (meaning ongoing revenues) versus pre-paid (a more sporadic and fickle source of revenue)?

Telecom’s latest financial result gives us an excuse to ponder such questions. Here’s what we find when we crunch the numbers, and throw in the equivalent Vodafone stats: during the 2011 calendar year, the two companies’ combined connection count dropped by 206,000 – a loss of just under 4,000 connections each week.

Vodafone went from 2,465,000 connections on December 31, 2010 to 2,420,000 million connections on New Year’s Eve 2011. Telecom dropped from 2,192,000 to 2,031,000 connections over the same period.

Meanwhile 2degrees, which is a bit more sporadic about releasing its figures, tells us its connection count has grown from 580,000 in March 2011 to 876,000 last month (a 296,000 increase over 11 months).

Those who are still paying attention, and are good at maths and geography, will have figured out that this means there are more mobile connections – not to mention sheep – than people in New Zealand. This is true. Think teens with multiple handsets, data sticks for laptops, and the increasing number of non-phone devices demanding their own connection to the internet.

Having added almost 300,000 new connections in 11 months, challenger 2degrees has reason to be happy, but what do Telecom and Vodafone think about heading south in a growing market?

Vodafone NZ accounts for 0.5% of the parent empire’s global connections, so we shouldn’t be offended that in its latest financial overview, this country warrants just a single sentence of commentary. Voda gives the same single sentence treatment to its operations in Tanzania, Ghana and Qatar.

Of New Zealand, the company says: ‘service revenue growth was impacted by voice and SMS termination rate cuts and the uptake of more competitively priced tariffs’.

Telecom is a bit more generous in its explanations. CEO Paul Reynolds said last week that while the company shed 92,000 pre-paid connections ‘with little revenue impact’ in the second half of 2011, it picked up an additional 27,000 ‘high value’ post-paid accounts and average mobile revenue per user was up 9% as customers churned through more mobile data.

The company still has 639,000 connections on its old CDMA network, which it is on track to shut down in July. But only 300,000 of those connections had been used in the past month, and they account for just 11% of mobile revenue.

Reynolds didn’t give much away about the performance of Telecom’s new budget sub-brand, Skinny. It will be fascinating to see how Skinny is performing relative to 2degrees when Telecom opens its books again in six months – by which time the new sub-brand will have been around long enough for us to assess its early impact.

In the meantime it is important Telecom doesn’t drop the ball on the Skinny front if it wants to stay competitive with 2degrees in the value sector of the market.

A good start would be for Skinny to deliver on its promises, one of which was that it would upgrade to an e-commerce capable website in February. Customers are still waiting and the new site remains a ‘couple of weeks’ away, according to recent Skinny Facebook posts.

We’re already seeing that people are happy to jump to 2degrees if they don’t get what they want from the incumbents, so Skinny will need to come up with the goods soon if it wants to make the most of all the hard branding work that’s been put in.

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