Vodafone to focus on cost controls
Vodafone Group PLC will focus on controlling costs amid bleak expectations for the economy next year, the company said Thursday.
"The economy I don't think is going to be fantastic next year," said Chief Executive Vittorio Colao at the Morgan Stanley TMT Conference in Barcelona."I will take a big look at costs now for next year, because I don't know exactly where the economy will be."
Colao pointed to Italy specifically, where the largest operator in the world by revenue has a unit, as having a challenging couple of upcoming quarters, but he signaled that the country's large contingency of small to medium-sized businesses would help provide a buffer against economic headwinds.
Greece, on the other hand, he said is in a much tougher situation. The U.K.-based operator paid EUR168 million to purchase spectrum in Greece in a country-sponsored auction on Monday.
Colao said that the company is trying to encourage consolidation in the country so it could further invest in Greece. In August, Vodafone said it was in talks with Largo Ltd., which owns Greece's No. 3 operator, about a merger of operations in the country.
At the event, Colao talked about being at the Verizon Wireless headquarters in Basking Ridge, N.J. Wednesday, working with the company's heads of purchasing to see where they could share purchases. The savings he indicated would be in the hundreds of millions.
More broadly, Colao said the company needs to focus on increasing the profitability of its growing data business, as consumers increasingly surf the web on their tablets and smart phones or use data-based messaging services such as WhatsApp.
The problem in Europe, he said, is data use launched earlier there than in the U.S. for example, and operators started discounting. The goal now would be to push smart phones with intelligent plans, leading to slightly higher prices.
He also said the company is considering pushing further into enterprise, and indicated that the company's partnership with Verizon Communications Inc. is starting to show results.
Verizon owns 55% of Verizon Wireless, one of the largest operators in the U.S. Vodafone owns the other 45%. Vodafone said in July that it would receive a GBP2.8 billion dividend from its stake in the operator after a six-year wait.
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