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The changing market

Today I'd like to discuss Vodafone's strategy in the context of the changing market. Firstly, let's talk about macroeconomic market trends. Not surprisingly, the global economy, competition and regulation are the three things that most concern Vodafone and the telecom industry as a whole.

Competition is pressuring all industries, and this is particularly true for the mobile sector as it approaches commercial maturity. The continual entry of new players is driving down prices, and the industry trend is heading towards bundled services and convergence. Competition has extended to resale, which is now relatively ubiquitous and spans all markets via Mobile Virtual Network Operators. This has been encouraged by the current regulations that have opened markets in a broad sense. The maturity of mobile markets has led to increased interest from regulators, which in turn has created various price pressures.

Customer divergence

Microeconomics concerns the behavior of customers. In its infancy, the mobile industry adopted a generic approach to customers, which persisted until relatively recently. Now, the diverged interests of business and individual consumers are increasingly dictating Vodafone's commercial strategy.

If we look back 5 or 6 years, consumers just wanted a SIM card. Handset price, functionality, and data connection speeds led the market. The current situation is more complex. Media now forms a very large part of the consumer proposition while for business customers, effective integration is of much more concern.

Next let us consider the qualities of portability and mobility. Individual consumers are oncerned about portability and mobility prompting questions such as: "Will my phone fit in my jeans' back pocket?" But for businesses, mobility centers more around the question: "Do the applications I need work on my mobile?"

So there is a subtle difference about consumer interest in battery and form factor versus, the way that the device can be used, and integrated on the business side for business customers.

Of course, quality underpins all aspects of the mobile field. When a mobile signal drops, individual users simply move somewhere else to obtain a signal. However, for business use, this is no longer acceptable as mobile connectivity now forms an integral part of the office environment. So Quality of Service, and all of those attributes customers associate with the fixed network enterprise environment are starting to impinge very significantly on customers' expectations in the mobile space. Divergence is central to our strategic approach and we're broadly focusing on total communication growth areas: the business market, mobile data services, and broadband services.

Operational innovation

Vodafone is embracing and driving innovation across a wide range of areas rather than responding to a narrow definition that centers on technology. In addition to technology, our approach covers new operation models, building intellectual property, new services and products, business transformation, and industry collaborations. With a holistic strategy in mind, we're instilling in our staff an understanding of the journey that we're undertaking to reach sustainable business development.

The first innovation here is to build a single converged network. Vodafone enjoys a strong global presence and this gives us an edge in terms of ensuring consistency, economies of scale, and passing on operational innovations to our enterprise customers. At present, one of our key operational innovations is the construction of a converged European IP backbone and IMS/NGIN service network to deliver all our national and international core service and transport requirements. The best in breed IP/MPLS router platforms help to deliver unrivalled scalability and performance to our customers.

Meanwhile, the new converged network enables centralization of the service delivery layer (GGSN, IMS, Voice Interconnect etc.) through 3 hosting locations to enable reduced costs and shorter time to market for new services. Lastly it also provides a platform to simplify our IP/Service network interface towards third party partners and the outside world.

The second innovation we've prioritized is network sharing. Radio access networks incur the bulk of OPEX and CAPEX, and so sharing access networks significantly curtails costs and allows us to focus investment on service development and competitive strategies. We've deployed a wide range of passive and active sharing models spanning all our markets, and doing so allows us to pass on resulting cost savings to subscribers.

Our third innovation strategy covers outsourced and managed services in the form of turnkey 'buildoperate-transfer' and ‘total cost of ownership' models that optimally respond to our customers' core services demands. We've designed these models to manage costs and ensure that we remain operationally focused on the activities that directly deliver the best service experience and benefits to our customers. Our solid partnership approach has also extended to managed services embracing areas such as spare parts management for network infrastructure.

Centers of excellence

Vodafone is aggressively pushing the development of the current 3G technology to realize its full potential. We're also driving the development of new technologies such as femtocells and LTE through a strong collaborative approach with leading vendors and third parties.

A key difference in the way we previously operated and our present approach is our deeper involvement with third parties. We utilize our partners' capabilities, applications, and ideas to maximize service quality for our customers. Over the past few years, we've partnered with world leading vendors to establish numerous innovation centers with the aim of generating ideas for new products and services. We've set up several of these with Huawei covering mobile communications, applications, core networks, and transport.

We work in a very methodical and structured way to make sure that we are tightly focused on driving our technical capabilities in the right strategic and commercial direction. These joint innovation centres work in a very structured and similar way. This forms an integral part of our mechanism for leveraging innovation; particularly in how we turn ideas into operational reality and commercial advantage.

To conclude, life is tough, but the ship is built well. We are addressing challenges through innovating, not only from a technical perspective, but particularly around our operating model, and the way we interact both internally and externally with partners and customers. By doing that, Vodafone will continue to shape the industry around us and become even stronger and more competitive.