Vodafone has been given a $2 billion life-line by its international shareholders to help upgrade infrastructure, a crucial step in winning back a strong reputation as the third-biggest telco in the local market.
The past few years have been tough for Vodafone as it struggles to compete with massive amounts of capital expenditure being poured out of the larger two telcos, Optus and Telstra. Yet even with another $2 billion in its coffers, experts say the number three spot may be the best it can do.
Chris Coughlan, head of research consulting at Telsyte, says he can’t see Vodafone being any bigger than third place.
“When Vodafone and Three merged, they started to approach Optus, but they’re still in that number three spot and I don’t see them rising above Optus any time soon,” he says.
“I think there’s probably room for three players, but I don’t think there’s room for four. There’s been so much investment in Vodafone they probably wouldn’t want to walk away from that.”
The Australian Financial Review reported Vodafone has won $2 billion from multinational shareholders in order to repay $1.3 billion in bank debt, and to complete upgrades to the mobile network.
Vodafone was contacted this morning by SmartCompany, and the company said while it could confirm a deal had been put in place, it could not confirm the total amount of money involved.
Vodafone has already rolled out upgrades to its entire 3G network, while 4G connections are expected to be switched on early next year. This has been a point of contention, as Telstra and Optus already operate 4G networks – this lack of high-speed access was a key point of difference between the two during the launch of the iPhone 4.
There has already been some speculation that the company could exit Australia entirely, having lost 700,000 subscribers since 2011. Its brand has been damaged by ongoing network problems and security faults.
The AFR report suggests Vodafone’s financial position caused the government to delay setting prices for new mobile spectrum, although it already carries a significant amount of spectrum already. Vodafone already said earlier this year that it won’t be spending much more money on spectrum auctions.
The company has also been undergoing a restructure, cutting staff and reducing marketing spend. The move has prompted speculation the company could be looking to exit, but Coughlan says such a move would be doubtful – it’s already spent too much money in Australia already.
In other words, Vodafone’s position is safe – as long as it continues to invest in building up its brand and reputation.
“I don’t think there’s a viable business plan for a fourth main asset. Sites are too expensive to obtain, and I don’t see any other entity going after the mobile spectrum.
“Vodafone can improve its position in the market.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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