Vodafone Sees Loss of UK Market Share and Lower ARPUs

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Note -- this news article is more than a year old.

The UK added over 3m new mobile connections during 2008 to take the total base to 75.75m equivalent to 124% penetration. The market is one of the most competitive in Europe if not the world with five established MNOs and several MVNOs of which the most successful are Virgin and the increasingly ambitious Tesco.

The year saw few real changes in status between any of the four largest operators, with market leader O2 gaining 60bp to achieve a share of 28.3%, second placed Vodafone losing 10bp to settle at 25.3%, Orange dropping 40bp to 21.1% and T-Mobile (the most severely affected of the lot) dropping 180bp to 19.4%. Roughly half of this was attributable to the fall in Virgin's share, which began the year at 6.2% of the total and ended it at 5.4%. The main consequence of this move is that Virgin - with 4.11m customers - has now fallen behind H3G, which has an estimated total of 4.42m.

ARPUs have continued to come under pressure, especially at those operators which report numbers in Euros. Vodafone has seen its average drop from 22.5 to 21.5, while O2 and T-Mobile have reported declines of 4.8 (to 28.1) and 5 (to 26.0) respectively. Orange, which uses rolling averages, saw an increase in Sterling terms, up from 265 to 272, but this number is not entirely comparable to those seen at the other companies. Hutchison's numbers are not included in The Mobile World Database, for two reasons. First, they refer to both the UK and Ireland - which is a very different market and rather more lucrative - and second, they are stated gross of incentive and acquisition costs, which alters the picture beyond recognition.

A final, rather different point, is worth noting. This is the proportion of revenue each of the main operates derives from non-voice services. Vodafone's has stopped reporting this but the H1 financials suggest a figure of 28.4%, well clear of the 22.0% seen at T-Mobile and the 23.2% at Orange but a far cry from the 35.6% seen at O2 this last quarter. Could this all be due to the iPhone? If it is, the premium O2 pays for the privilege of distributing the device could well be justified.

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UK: Net Additions, Q1 07 Q4 08

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