NEW YORK-Although his company recently completed field trials with Qualcomm Inc., Vodafone Group plc Chief Executive Officer Chris Gent believes next-generation wireless technology, rather than Code Division Multiple Access technology, is the solution to network capacity expansion in areas where high customer use warrants it.
“Qualcomm’s not going to get a look in with CDMA,” Gent told RCR.
Just last month, Qualcomm Inc. announced the success of its six-month field trial in demonstrating its Interim Standard-95 CDMA air interface is compatible with Vodafone’s Global System for Mobile communications network.
Vodafone allowed the joint testing to take place “partly to inform opinion in the debate over next-generation wireless,” Gent said.
The United Kingdom’s largest wireless telephony carrier has endorsed the recent European Telecommunications Standards Institute consensus on a third-generation standard that doesn’t incorporate cdmaOne, as Qualcomm’s IS-95 air interface is called.
To alleviate capacity constraints and to parry competition from personal communications services entrants, Vodafone-with more than 3 million domestic cellular subscribers-already has converted much of its analog customer base to digital service. Gent also said the third generation will provide enough capacity for fixed wireless applications.
The chief executive said he is convinced voice communications will be far and away the mainstay of the wireless industry for at least the next decade. Today, he pointed out, wireless data accounts for just 2 percent of airtime minutes and far less than that as a percentage of revenues because of the short bursts of traffic it involves.
“I’ll be long retired before the rhetoric about (third-generation wireless) multimedia and fast data services matches reality,” Gent said.
“Remember, [Integrated Services Digital Network] was hyped for a long time. ISDN is being sold now in a reasonable volume, 15 years after it first came out. It takes a long time for the utility of a technology to be identified by (end) users.”
Similarly, Gent said he doesn’t view Internet telephony as either “a threat or an opportunity.”
“There’s a lot of work to be done to get call quality up to speed, and it is essentially a fixed-to-fixed communications environment.”
Vodafone is an equity stake holder in Globalstar L.P., which uses cdmaOne as a primary communications channel. The low-earth-orbit satellite carrier plans to start commercial service next year.
South Africa-where Vodafone serves 900,000 terrestrial wireless customers and 25 percent of all wireline and wireless calls-is one of the markets where the carrier plans to integrate Globalstar into its service offerings, Gent said.
“Globalstar only has a capacity of 3 million, so we just see it as an additional niche market,” he said.
Paging, by contrast, is a market that Vodafone likely will seek to exit. Vodafone Paging in the United Kingdom has about 200,000 pay-as-you-go subscribers and another 100,000 prepaid customers. Gent termed “good” the growth in Vodafone’s paging business, which he called “cash generative.”
However, the universal application of calling-party-pays requirements across telecommunications services has created a situation where paging isn’t as popular as it is in the United States. Furthermore, Vodafone’s GSM cellular service offers short messaging.
With an eye on the goal of 20-percent compound annual growth rates in cash flow on current assets, Gent said, “paging isn’t that exciting … We probably will sell our paging assets.”
In the United Kingdom, where overall wireless telephony penetration is about 15 percent, Vodafone’s market share is in excess of 40 percent. Its strategy to increase dramatically its customer base has included the introduction of prepaid wireless services and a large investment in its own, Vodafone-only retail outlets, which now number 250.
Working with its infrastructure supplier, Ericsson Inc., Vodafone also is “on track” in rectifying “the millennium problem,” Gent said.
“We had to do it this year, before we can sign people on for one-year contracts.”
On a basis proportionate to its ownership stake in carriers outside U.K. borders, Vodafone’s market share is 38 percent. Vodafone has interests in Australia, France, Germany, Greece, the Netherlands, South Africa, Sweden and Uganda.
“We believe that in most of the developed world (wireless telephony penetration) will get to 50 percent.
“We had a net growth of 240,000 (U.K.) subscribers during the Christmas quarter, and 330,000 in proportionate subs. We expect this (fiscal) year (which ends March 31) to have more than 1 million customer additions from our international assets, probably twice that of the (United Kingdom).”
Vodafone recently won a bid with AirTouch Communications Inc., its joint venture partner in Sweden, on a PCS-1900 license in Egypt.
Generally speaking, Gent said Vodafone looks favorably on Africa as a market opportunity, although one with significant perils.
“(Sub-Saharan Africa) is a big security risk. They used to kill engineers and steal copper wire. (Many) people don’t have credit. They don’t have (wireline) phone service and they’re not going to get it,” Gent said.
“We like Africa. We have 6,000 mobile customers in Uganda who average 300 minutes per month and all pay up front in dollars. It’s profitable. We’re also going into (the Republic of) Botswana.”
Vodafone soured on and sold its interests in its only Asian property, a non-GSM carrier in the crowded Hong Kong market, which has 11 competitors.
“The collapse in values could present (new) opportunities to acquire cellular properties, although most of the markets in Asia are overcrowded (with carriers).
“We have two criteria. Is it GSM? Is it clean?”
The opposite of “clean” in this context isn’t “dirty.” Rather, many Asian telecommunications carriers are subsidiaries of large corporations with diverse lines of business, with which Vodafone doesn’t wish to become involved.
Keeping it clean, i.e. purely wireless, also is Vodafone’s strategy in the newly deregulated wireline telecommunications marketplace in Europe.
“We don’t want to be in fixed, but many large corporate customers want integrated fixed and wireless services,” Gent said.
As the newly deregulated and privatized Post Telegraph & Telephone administrations seek to respond to that customer demand for bundled services, Vodafone will be “looking for commercial, not strategic, alliances.”
