How Vodafone came back from Vodafail

AUGUST 27, 2015
News.com.au
IT WAS the perfect storm.
In mid-2009, Vodafone had just merged with 3 — the Hong Kong company that completely disrupted the mobile industry at the start of the 3G age. It was a move that was meant to cover Vodafone’s bases before the impending smartphone revolution. But the revolution had already begun.
While Optus and Telstra had been preparing for the surge in data usage for several years, Vodafone and its engineers had focused their time on the merger. When the sudden surge of data demand hit, the telco’s resources were stretched and base stations could not be built or upgraded to cope with the demand. Add to that an influx of customers moving to the network due to what appeared to be the best value mobile plans in the business, and Vodafone was face-to-face with a tsunami that was going to take it out.
And take it out it did. More than two million customers left the network between 2010 and 2013. Calls dropped out, data was slow and to call the coverage patchy would have been a compliment. Enter four years of #Vodafail.
Fast-forward to today and the company has turned around completely. It boasts arguably the best metro mobile network in the country, and by far the best value plans.
It’s a result of more than $3 billion of infrastructure and customer support investment, including building one of the fastest 4G networks in the country.
Bill Morrow was crucial to Vodafone’s turnaround.
Bill Morrow was crucial to Vodafone’s turnaround. Source: News Corp Australia
The turnaround began in March 2012, when Bill Morrow was appointed chief executive officer. There was possibly no better man for the job. Mr Morrow had a reputation for turning even the most struggling phone companies around and he set about doing the same with Vodafone over the next 18 months.
He focused on three areas: building a world-class network, investing in customer care and doing the right thing by customers.
The telco invested big money into a Hobart call centre so customers heard a familiar Australian voice when they had a problem. They listened to what bothered customers about their mobile networks and introduced improvements, such as $5-a-day roaming and data safeguards to avoid bill shock.
Thanks to big investment from the owners, the company upped its marketing budget, promising customers that it had fixed its errors and now had one of the best networks in the world. Vodafone even introduced its 30-day network guarantee, which meant customers could hand back their phones and leave the network, no questions asked, if it wasn’t up to the standards they expected.
Mr Morrow eventually left Vodafone in early 2014, after most of his work was done, to help run the National Broadband Network. The company brought Inaki Berroeta over from Romania to replace him. The charismatic, vintage-car-loving Vodafone veteran was tasked with the challenging, but rewarding, job of finishing the turnaround and making Vodafone the serious competitor it is today.
“We are now growing. We have been growing customers since October last year,” Mr Berroeta told news.com.au. “We have grown about 100,000 customers since then.”
The collapse of the network in 2009 put the company in crisis. Vodafone Australia’s joint owners, the Vodafone Group and Hutchison Group, invested nearly $3 billion to fix the problem. And while a lot of that was spent fixing the existing 3G network., more was spent future-proofing their 4G network to make sure there was never another collapse.
“The first thing [we fixed] is our network. We have invested a significant amount of money into our network, close to $3 billion. It’s something that transformed the quality of our services for our customers,” Mr Berroeta said.
“We have done it at the same time as the market has moved towards new technology. It was the right time to invest.”
When the spectrum auctions came up in 2013 for the old analog TV network to be refarmed into mobile networks, Vodafone decided not to take part. At that point, all three telcos had a higher-frequency network spectrum that could handle more people but cover a smaller area. With the lower-frequency spectrum, the telcos could deploy decent regional 4G coverage, while building better coverage.
The auction was at the midpoint of the company’s turnaround, and analysts feared Vodafone was again missing a key investment opportunity for the future. But it had another trick up its sleeve.
“Two years ago, we had much more 3G spectrum than we needed. You need to invest in spectrum when you need it,” Mr Berroeta said.
So instead of buying more spectrum they didn’t need, Vodafone turbocharged their existing 850 megahertz network from 3G to 4G.
The company was a joke back in 2010, when more than two million customers left the networ
The company was a joke back in 2010, when more than two million customers left the network.
Source: Supplied
FIXING REGIONAL AUSTRALIA AND TELSTRA’S MONOPOLY
Investing in spectrum can only do so much, though. And customers who’ve tried to use Vodafone outside of a CBD or major regional centre would be familiar with the feeling of disappointment when they see their phone has little or no coverage.
But not only is Mr Berroeta sick of that, he’s sick of the lack of options that regional consumers have and he wants to fix it.
“We’re working with the government so the government makes better usage of the better funding that’s being invested into the communications services in regional Australia,” he said.
In the past, the government has spent most of its regional telecommunications funding budget with Telstra, which has created a monopoly in those areas.
“We want the government to take a look into how government money is being spent.
“A lot of the reason why Telstra has such large coverage today is because of [the] universal service obligation, plus different state and federal aids that have allowed them to reach remote areas of Australia.
“But the effect there is you get to a point with all the public money and all this public spending — you have consolidated a single player in a big part of Australia.”
Earlier this month, Inaki Berroeta and Vodafone opened a new regional store in Armidale.
Earlier this month, Inaki Berroeta and Vodafone opened a new regional store in Armidale. Source: Supplied
Thanks to the NBN though, this may soon change. Telcos in most regional areas rely on Telstra’s fixed network for their backhaul, which is what connects the tower to the internet and to the phone network. This can make it expensive for them to access and is often a deterrent when looking to invest in an area. With the NBN though, this will give the likes of Vodafone and Optus access to a cheaper backhaul, allowing them to put up more regional towers and giving regional customers more competition.
“If you are in the middle of New England [in NSW], for example, and you want a fixed connection, there is only one supplier. For us, when I want to build an antenna there I also have a single supplier,” Mr Berroeta said.
“The problem for us when we build an antenna out there is not [the cost] to build an antenna — that is actually a lot more economical than building in a metro area — but the cost to [use Telstra’s] backhaul is prohibitive. We believe this is another facilitator for further competition.
“The investment in this area is being penalised by having a signal supplier. The NBN will reach a lot of this population. It will allow us to use NBN services for our backhaul to significantly reduce our backhaul costs and give consumers greater competition.
“I’m really looking forward to a time when we can use our backhaul with them [NBN], and not with a backhaul who is ripping us off today.”
THE FUTURE
While becoming the number two telco would be a win for Vodafone, which sits in third place behind Telstra and Optus, that’s not a goal that Mr Berroeta has set for the company.
“I don’t set those types of goals,” he said. “My goal is to serve the customers better than anybody. My goal is that the customers of Vodafone are given the best value that anyone can offer, how we will create an alternative for what customers have been getting from their telcos,” he said.
“The reason that Telstra is offering more value recently to customers is because we are here. We have brought better value and offers to the market.
“Traditionally, telcos in Australia have been reluctant to give transparency to customers. There’s a lot of consumers who are afraid to use services because of costs. For example, roaming and lots of data. We have made a significant step to bringing something that’s affordable in roaming, when other telcos have been reluctant.”
New technology is coming too. High-speed Category 9 Long Term Evolution will be tested before the end of the year, and the ability to make calls and send texts over Wi-F when you have no phone reception is coming sooner rather than later.
But that’s not why Vodafone thinks you should sign up. It wants to be the opposite of everything you hate about phone carriers. Transparency, fair prices and a healthy relationship are all its main goals.
“We want to change the perception of a telco to become a company that you really like,” Mr Berroeta said. “The most important thing we offer is an alternative.”