HTA 8.33% 11.0¢ hutchison telecommunications (australia) limited

Vodafone rules out merger with HTA, page-2

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    21 October 2001

    Helen McCombie

    "What we need to do is to send more services and provide ways that people want to use their phone so they use it for more things."

    It's taken a lot of money and effort for Vodafone, Australia's third mobile phone group, to get where it is now: still third and barely profitable. Meanwhile, bigger competitors Telstra and Singapore Telecom's Optus business, still run one and two respectively, and earn reasonable profits. Vodafone tried to float but that fell apart in the tech wreck, and now it's decided to go for returns. Grahame Maher is the new Chief Operating Officer and is speaking with Helen McCombie.


    MAHER: The industry is tough right now and the industry is managing quite a lot, so there are lots of things in our industry that are really quite different, and do we have a lot of challenges, sure we do. But the whole industry has a lot of challenges.

    REPORTER: You've been very outspoken about how the company has lost its way.

    MAHER: Yep, certainly. I think Vodafone, when they entered the market here were the new player and were the interesting, exciting player and then the last little while the whole industry in my view has lost its way, and now everything looks the same. It is just a bunch of handsets and different offers and there is nothing actually all that different. It seems that people have been locked into things that in many other parts of the world aren't done, like long term contracts and having to sign something as big your house mortgage just to buy a phone, and it is really unusual that that has prevailed here in Australia. So I think Vodafone in Australia has been sucked in to some of that same behaviour.

    REPORTER: You need to increase your EBIT to 400 million dollars pre tax. And in the year to the end of June you made 98 million dollars profit. It doesn't seem that you can turn things around?

    MAHER: Well I think it is. And as a group we think it is. Those sorts of numbers for us and change in our business where we invest a lot up front before we get a return later on, is quite common. So we think we can and I guess we will find out.

    REPORTER: How long is it going to take?

    MAHER: I don't know and I don't actually think that it is possible to put a defined time on that. We will continue to make changes in the market—like we have done recently with the no plans, and which is something that probably people would not have considered possible. In this businesses let alone in this industry only a month or two ago.

    REPORTER: But isn't your parent looking for a return on capital now?

    MAHER: Our global business is maturing just like the industry is maturing, so cash becomes more important as we mature and therefore around the world we are looking to increase our cash, no doubt about that. Is that part of our target, yes it is, does that mean we need to get cash positive this year, no.

    REPORTER: When do they want you to be cash positive?

    MAHER: When it is right and when it is achievable and when we can get there.

    REPORTER: What about cost cutting, there are still costs to come out?

    MAHER: In any business as it becomes—continues to be run and is mature, there is always cost issues that we have to address in many business. There will be constant change in our industry and our business and that means we will review it but it is a question of what the costs are for what the revenues we have and it is not just a total, is it just cost cutting or is it just growth, it's always both.

    REPORTER: So the work force is now stable, no more cuts?

    MAHER: The work force is stable, will there be changes to our work force, yes. Will I be planning cuts and redundancies in large lumps, no.

    REPORTER: But there could be some more people to go?

    MAHER: Yes there will be. Or there could be absolutely.

    REPORTER: Where do you get your growth now?

    MAHER: That is a good question. That is a question the whole industry is asking. Firstly there is all sorts of interesting questions about where do we go as far as customer numbers and we've been quite open around the world saying that we think that the customer that are reported aren't quite accurate if you like, and they have been reporting for the last three quarters active and inactive customers. In the last quarter in Australia we started to change our reporting so that we actually reported less customers, or negative customers in that quarter, that's part of changing the way we report numbers to what I would call real customers or active generating customers. That's part of our change is looking at which customers actually spend money. Then what we need to do is to send more services and provide ways that people want to use their phone so they use it for more things, and start replacing their land line, or some other issues or start to us it for web enablement and other things, so they spend more money on that service. And then there is new applications and new customers. Some of those might be machines, not people, as we put things like our service into burglar alarms, coke machines, cars and more extra uses. But more and more growth from the existing customers that we have.

    REPORTER: Can you survive without any more capital injections?

    MAHER: You know, I haven't said that there is no more capital injections.

    REPORTER: So the parent would still contribute, you know, if you called upon them?

    MAHER: Someone like the ones you were mentioning before says 'you want to buy a business', would we be able to have access to capital, absolutely.

    REPORTER: What about a float, is that out of the question now?

    MAHER: You now that was quite topical here in Australia around our float process. We have a big asset here. We have a 3 billion dollar investment, we own spectrum and other things. It would be strategically nice to have to float and have an Australian public presence but we are not going to do that in the market that is not healthy at the time, and we'd only be doing it when it made good commercial sense. We don't have to raise money, we've got plenty of cash and plenty of resources to money, so we don't need a float to raise money. If it makes good sense at some time in the future, it may come back on to the agenda. Today, not on the agenda.

    REPORTER: How tough is it going to be for Vodafone to survive and prosper?

    MAHER: Yeh, I think your words are survive. I would think it is tough for us to take the next step of growth and development. We're not in a survival mode, so we aren't one of the small players that's desperate around how we write the next cheque to pay the staff or something. This is a big business, we're one of the top 20 businesses in the world, we're a big—we're the leading business in the world in mobiles communications, the leading one in the region in mobile army space and a big player in Australia. You know, 2 million customers, lots of turn over, 1.5 billion. It is a big business. It needs to change and grow just like the other businesses but it is not a question of survival. It is a question of how it takes the next step of development.


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