Vodafone to land a partnerMichael Sainsbury October 26,...

Vodafone to land a partner
Michael Sainsbury
October 26, 2006

VODAFONE Australia is poised to turn its back on its 12-year mobile-only strategy, and planning to open a tender for a landline broadband partner, with the aim of earning $200 million in revenue from fixed-line services within three years.

Vodafone's business has stagnated in recent years with the entry of well-funded Hutchison Telecommunications into the market and fresh aggression from Telstra.

Its profit for the year to March 31, 2005, fell to $49.4 million from $144.5 million the previous year as its revenues grew from $1.74 billion to $1.94 billion.

Vodafone, the world's largest mobile group, has already tested the local market by talking to six second-tier players, including iiNet and Primus, and wants to have a commercial offer available by mid-2007.

"What we are interested in in Australia is to offer a fixed-line proposition through a partnership," Vodafone marketing chief Jon Casey said. "It is highly likely that will be done through a commercial process and I will be very disappointed if that hasn't at least started by Christmas."

Five months ago Vodafone Group's chief executive Arun Sarin announced a new strategy for the hitherto mobile-only group branded "beyond mobile". Under the plan, he wants Vodafone to have 10 per cent of its revenues from new non-mobile services by 2010. Vodafone recently struck a deal with former rival British Telecom for fixed-line broadband in Britain and has made similar deals in other European markets.

"What that can mean will vary from market to market and in Australia we are competing against already largely converged players," Mr Casey told The Australian.

Macquarie Equities analyst Gary Pinge said that as mobiles "continue to become competitive, the focus of mobile players to reduce customer turnover is by bundling fixed-line services together with mobile. This is certainly the case in Europe with recent trends from Vodafone, Orange and O2."

Last month Vodafone New Zealand bought fixed-line broadband group iHug from Perth-based iiNet for $36 million, signalling the start of fixed-line activity in the region.

"We have spent a lot of time getting our head around services outside mobile and understanding broadband fixed line," Mr Casey said.

But Vodafone is unlikely to buy a fixed-line player in Australia and will instead look at making a strategic alliance.

Mr Casey said Vodafone Australia would also be targeting 10 per cent from non-mobile services by 2010.

Australia's two biggest telcos, Telstra and Optus, are pushing bundles of products where users can get services such as email messaging and downloads of music and video on both mobile and fixed line.

Australia's other mobile-only telco, Hutchison Telecommunications, which runs the "3" network, has also signalled that it is keen to explore similar relationships with fixed-line broadband players.

It is understood that Hutchison will not make any move on fixed-line services until next year.