The chief executive officer of Vodafone, Vittorio Colao, has said that the telecommunications giant will use its customer data expertise to fend off the competition that is likely to be heightened in Italy by French newcomer Iliad in order to avoid a price war similar to what was witnessed in India. Backed by Xavier Niel, a French billionaire, Iliad intends to capture about 25% of the mobile market in Italy using cut-throat prices. This was the same strategy that helped Iliad to conquer the market in France half a decade ago.
When Reliance Jio entered the scene in India, it was able to capture over 6% market share in 12 months largely due to the cheap data and free voice that it offered. This forced rivals who included Vodafone to cut prices and merge. Currently the merger of Vodafone and Idea Cellular is still awaiting of India’s regulatory authorities.
Awaiting regulatory approvals
“India competition remains intense… There are however signs of positive developments in the Indian market … We are making good progress in securing regulatory approvals for our merger with Idea Cellular and in monetising our tower assets,” said Colao.
In order to avoid a repeat of what happened in France and India in Italy, Colao has said Vodafone will use its strong data analytics to identify its Italian customers who are most vulnerable and offer them concessions customized to their needs. Without providing details Colao also said that Vodafone was prepared for a couple of possible scenarios.
The adjusted core profit of Vodafone’s Italian unit increased by 8.8% in this year’s first half despite the intense price competition. Vodafone is the second biggest mobile operator in the world but it Italy is in the third position after Telecom Italia and Wind-Tre.
Annual profit forecast
Vodafone’s plans with regards to the entry of Iliad in Italy coincides with the telecommunications giant raising the annual profit forecast marking the first time the company was increasing its organic EBITDA. Previously the adjusted underlying earnings had been expected to rise by between 4% and 8% but the rate has been revised upwards to 10%.
The move by Vodafone has increased hopes that the long-awaited recovery of the telecommunications giant after years of investment, disposals and restructuring has arrived. According to a UBS analyst, Polo Tang, the performance of Vodafone in Q2 beat estimates in almost all its markets especially in Spain and Germany. Vodafone however struggled in its domestic market of the UK where revenue fell by 3%.