Earnings release for the FY2003 ended March 31, 2004 - 2
Operating highlights - mobile telecommunications
As competitors accelerated their efforts to offer competitive services and price plans, Vodafone K.K.'s market share at 31 March 2004 was marginally lower at 18.4% compared to 18.5% at 31 March 2003.
Operating revenue increased 3.3% compared to the previous fiscal year to 1,509.1 billion yen. Within this total, operating telecommunications service revenue grew 4.3% to 1,206.4 billion yen. Non-voice services as a percentage of ARPU for the fiscal year averaged 22.0%, an increase of 1.7 percentage points compared to the previous fiscal year. Ordinary income declined by 24.1% compared to previous fiscal year to 181.8 billion yen, due to an increase in 3G equipment depreciation, a provision for slow moving handsets, an increase in customer retention costs and incremental costs related to operating the 3G network.
Vodafone K.K.'s operating highlights for the year ended 31 March 2004 are as follows:
- Net customer additions totaled 1,039,000, representing a 17.7% share of market net additions for the fiscal year.
- Sha-mail picture messaging and Movie Sha-mail video-clip enabled handsets continued to register strong demand. There were 11.86 million such handsets in use at the end of March 2004, representing 79.0% of the customer base. Movie Sha-mail handsets, which also have Sha-mail capability, exceeded 3.0 million in March 2004, representing 20.1% of subscribers.
- The percentage of prepaid customers at the end of March 2004 reached approximately 9% of Vodafone K.K.'s customers.
- Vodafone K.K.'s continued to introduce innovative communication devices in fiscal 2003:
- In May 2003 the J-SH53 was released as the world's first mobile handset with a megapixel camera, and the V601SH, which features an autofocus 2 megapixel camera, was offered in December 2003.
- In December 2003, the V601N was launched as Japan's first analogue TV tuner handset.
- The 3G version of Vodafone live! was launched in December 2003 to let customers enjoy enriched Sha-mail, Movie Sha-mail and web browsing services both in Japan and abroad. Two compatible handsets, the V801SA and V801SH, have been available since December 2003 and April 2004 respectively.
- In February 2004, the VRM301R remote module was marketed to industrial and business machine manufacturers to meet their needs for remote control and monitoring.
- In February 2004, the VC701SI 3G datacard terminal was announced. The VC701SI lets customers access the internet anywhere on their PCs, PDAs or other terminals at high speeds.
- Vodafone K.K. continued its efforts to delight customers with improved services:
- In April 2003, efficiencies and customer care were enhanced by integrating the customer service functions of centres separately located in the Hokkaido, Tohoku, Kanto and Hokuriku regions into a single East Japan customer service centre.
- Major retention initiatives were launched in October 2003 to improve competitiveness. As a result of new discount services, increased retention payments, and attractive handset offerings, the company observed a positive impact on monthly average churn, which was 1.91% for fiscal 2003, down 0.03 percentage points compared to that of the previous period.
- With the transition to the Vodafone brand in October 2003, shops were remodeled as Vodafone shops, featuring improved floor ambiance to suit customer tastes. To further strengthen its brand image, the flagship shops Vodafone Nagoya and Vodafone Shibuya were opened in March 2004.
- In November 2003, Vodafone K.K. launched a service called Vodafone Biz Access to make the mobile internet easier to use for corporate customers. Under this service, a company is charged a flat rate for web packet communications traffic for industrial-use web content that it provides.
- The company also stepped up measures against spam mail. In December 2003, a new function to limit the number of mail transmissions in a given time period was introduced and the same function was applied to the 3G network in March 2004. Furthermore, in February 2004, Vodafone K.K. established a new e-mail address for customers so they can report spam they receive from other Vodafone handsets.
- Vodafone live! enjoyed continued popularity and subscribers accounted for 86.4% of the customer base at the end of March 2004. The 3G version of Vodafone live! launched in December 2003 provides customers with faster speeds and richer content offerings such as Chaku-utaR ringsongs.
- Indoor and outdoor 3G service areas were expanded by introducing economical, small base stations. Accordingly, nationwide population coverage reached 99.5% with approximately 13,500 3G base stations at the end of March 2004. 3G customers could also roam on 122 GSM networks in 85 countries and regions, approximately 98% of travel destinations originating from Japan, at the end of fiscal 2003.
- Vodafone K.K. strengthened its commitment to corporate social responsibility (CSR) with the launch of a new handset recycling scheme in April 2003, whereby a total of 20 million yen in proceeds was donated to UNICEF Japan in fiscal 2003. Furthermore, to increase environmental awareness and promote the use of mobile handsets as an educational tool, the Mobile Eco School Awards programme was launched in July 2003. Last year, students from 43 high schools nationwide demonstrated science research projects on the themes of ecology, environment and science.
- As the competitive landscape intensified, Vodafone K.K.'s ARPU for fiscal 2003 fell 7.3% compared to fiscal 2002 to 6,730 yen due to a growing prepaid customer base, the impact of new price plans and certain high value customers migrating to competitors. Whilst a trend towards overall ARPU decline was expected, data ARPU was stable, partly offsetting voice ARPU decline during the period. Data and content revenues accounted for 22.0% of total service revenues for the fiscal year.
- New customer incentives fell to 32,500 yen compared to 37,600 yen in the previous fiscal year, reflecting sales commission reductions and increased sales of prepaid products.
- Vodafone K.K. recorded a decline in its EBITDA by 4.7% down to 418.0 billion yen compared to the previous fiscal year due to an increase in a provision for slow moving handsets, an increase in customer retention costs and incremental costs of operating the 3G network. Margin decline was partially offset by lower acquisition costs due to slower customer growth and an increased prepaid customer base, and improved efficiencies such as customer centre integration. EBITDA margin was 27.7%, a 2.3 percentage point decline versus the previous fiscal year. The decline was in line with expectations.