In a departure from its traditional mobile-only strategy, Vodafone Group on Tuesday announced plans to introduce new services that hinge on DSL, which the operator will have to resell in order to deliver to customers.
The new strategy points to dramatic changes in the communications market that pit Vodafone against the likes of fixed line operators, broadband players Google's voice service, and companies that resell mobile services.
"We find that the business model is changing and we have to stay one step ahead so we don't get disintermediated from the customer," said Arun Sarin, chief executive of Vodafone, speaking during a conference call to discuss the new services and the operator's year-end financial report. "The fundamental business model in mobile will continue to change."
He introduced a new strategy called Mobile Plus, which will roll out in several stages and which Vodafone expects will generate 10 percent of its revenue in the next three to four years. "The point is to capture minutes from landline and move it to wireless," Sarin said.
The initial stage will see Vodafone extending a service currently available in Germany and known as Zuhause, or At Home. Mobile subscribers pay a low rate for a large number of local and national mobile voice minutes that can be used while they are at home. Vodafone will make a similar offering for business people that will be relevant within their offices.
The Zuhause offering attracted 630,000 users in one year and currently accounts for about 1 percent of Vodafone Germany's monthly revenue. By the end of this year, Vodafone Germany hopes to have 2 million Zuhause customers.
The next phase will be for Vodafone to start selling DSL (Digital Subscriber Line) services to subscribers of the At Home service, offering a bundled price plan. In Germany, Vodafone will resell the DSL access from Arcor AG & Co., a company it owns, starting in the third quarter. According to a Vodafone study, 37 percent of Zuhause customers said they'd sign up for a Vodafone DSL service if offered it.
In other markets, Vodafone will resell from landline operators that it doesn't own. Once the combined wireless and DSL service is available, Vodafone will work on integrating applications and services so that they are available in both the mobile and the PC environments. For example, the mobile Vodafone Live portal will be extended to the PC.
Vodafone also hopes to make applications like instant messaging and the relevant buddy list, address books, voicemail and streaming radio the same and available on both the mobile phone and PC.
The final component of Mobile Plus will be a push for Vodafone to try to earn revenue from Internet advertising on mobile devices. "There is an emerging advertising business model online, a la Google, a la Yahoo," said Sarin. "We have to find a way to monetize this and create new revenue streams and we intend to do this in the next one to two years."
Vodafone did not expand on what its mobile online advertising initiative would look like for customers.