How Vodafone Digital program will cut cost and improve user experience

Vodafone Egypt telecom networkVodafone Group CEO Vittorio Colao has a well defined strategy in place to transition the telecom giant as a digital operator to cut costs and improve customer experience.

Vodafone Group revenue posted revenue of €23.1 billion (–4.1 percent), adjusted EBITDA of €7.4 billion (+13 percent), operating profit of €2 billion (+32.5 percent) and net profit of €1.2 billion in the first six months of fiscal 2018.

Decline in revenue was mainly due to the deconsolidation of Vodafone Netherlands, and foreign exchange movements.

“Revenue grew organically in the majority of our markets driven by mobile data and our continued success as Europe’s fastest growing broadband provider,” Vittorio Colao said.

Cost efficiency

The main achievement for Vodafone was the reduction in its operating costs for the second year running.

Vodafone achieved 32.5 percent increase in operating profit reflecting operational leverage and the benefit of cost efficiency initiatives.

Vodafone said areas of significant cost savings include procurement, shared service centres, improved sales channel efficiency, standardised network design as well as zero based budgeting initiatives.

Fit4Growth has contributed to improving cost structure. 19 out of 26 markets grew adjusted EBITDA faster than service revenue in H1, driving 2.5 percentage point improvement in the Group’s adjusted EBITDA margin to 32 percent.

Investment priorities

Vodafone will expand fibre infrastructure in Germany, Portugal and the UK in the second half of the year.

Vodafone announced significant new fixed investments and strategic partnerships in Germany, the UK and Portugal.

Vodafone invested in network quality post Project Spring and in Customer eXperience eXcellence (CXX) program.

Vodafone is now the leader or co-leader for voice services in 18 out of 21 markets, and in 14 out of 21 markets for data.

Mobile data traffic increased 88 percent with 63 percent growth in Europe and 116 percent in AMAP region.

Wireless customers in Vodafone’s major European markets are increasingly using mobile networks rather than Wi-Fi due to the improvement in quality of 4G and 4G+ networks as well as data plans.

Around 50 million additional households are expected to adopt NGN broadband in Vodafone Europe during the next five years. The shift to NGN is an opportunity to capture substantial profitable market share in Europe’s broadband market.

Vodafone Europe’s NGN footprint covers 99 million households.

Vodafone will invest approximately €2 billion of incremental capital expenditure on broadband under the Gigabit Investment Plan for Germany by the end of 2021.

Vodafone aims to deploy fibre to around 2,000 business parks across Germany. Vodafone FTTH will also reach around 1 million rural consumer homes with FTTH. Vodafone will also upgrade existing cable infrastructure to deliver 1Gbps speeds to 12.6 million households.

Vodafone has a FTTH network sharing agreement in Portugal with NOS, enabling Vodafone to access an additional 1.3 million homes and businesses. Vodafone Portugal aims to expand the coverage to 4 million, representing 80 percent of households in the country.

Vodafone has partnered with CityFibre in the UK to market FTTH to up to 5 million households by 2025.

Vodafone is Europe’s fastest growing broadband provider, adding 499,000 new broadband users. Its NGN customer base grew by 826,000. This supported fixed service revenue growth of 4.5 percent in H1.

Vodafone Group has 18.6 million broadband customers including 12 million subscribers on fibre and cable.

Fixed line business now contributes 24.6 percent of Vodafone Group service revenues with 28.1 percent in Europe alone.

Digital Vodafone

Digital Vodafone program is designed to enhance customers’ experience, increasing revenues and cost efficiency.

Under the Digital Vodafone program, the mobile operator will be using digital technologies to deliver engaging digital experience to customers. Investment in innovative digital technologies is expected to create incremental revenues while reducing net operating costs.

The Digital Vodafone program strengthens its existing Customer eXperience eXcellence (CXX) initiative and enables the operator to build upon Fit4Growth achievements.

Vodafone will be blending the digital and physical assets to provide instant and easy interactions to deliver the most engaging digital experience for our customers.

Vodafone will be using data analytics to improve commercial and technology investment decisions.

Vodafone will be automating its operations as part of its strategy to generate incremental revenues and reduce net operating costs.

The launch of Digital eXperience Layer (DXL) was aimed at cheaper IT development.

Vodafone will set up Digital Accelerator teams in its largest European markets, and will expand the program to all markets in calendar 2018.

Vodafone aims to increase the use of data analytics to provide predictive, proactive and personalised offers to customers.

Vodafone aims to optimize the efficiency of marketing spend, enhancing ARPU and improving direct channel mix.

MyVodafone and digital marketing channels will over time become the main customer acquisition and management platform.

Vodafone will be using chatbots and digital agents – riding on artificial intelligence technologies – to enhance customer engagements.

Vodafone will install new middleware on top of its legacy IT systems. This Digital eXperience Layer will accelerate the deployment of new digital capabilities, de-coupling them from the longer and financially costly upgrade cycles for legacy billing and other systems.

In addition, real-time data analytics will enable even smarter network planning and deployment, as well as more precise ROI-based investment decisions. Together with the ongoing effort to migrate 65 percent of IT applications to the cloud, Vodafone aims to achieve significant Capex and Opex efficiencies.

Vodafone expects there is scope for digitalisation to accelerate the simplification and automation of standard processes, in both operational and support areas. These include IT and network operations, customer management back office functions and all other administrative activities.