OUTGOING Vodafone Australia chief Bill Morrow says Telstra will be forced to offer more generous mobile plans as it reacts to a surge of competition.
Mr Morrow, who takes the helm of the National Broadband Network next month, has also accused Telstra of “panicking” as it seeks to maintain its market dominance.
But he warned the nation’s biggest telco could face a shareholder backlash if it forgoes any profit to hold on to its market share.
Mr Morrow was talking to BusinessDaily ahead of his handover today to new Vodafone Australia chief Inaki Berroeta, formerly the head of Vodafone’s Romanian business.
Telstra last month cut prices on a series of mobile phone plans for the first time in three years, with analysts saying it was a direct response to Vodafone’s aggressive pricing.
“That was the final indicator that Vodafone is coming back,” Mr Morrow said. “I think Telstra has responded in price because they’ve seen the response Vodafone have had in the market.”
“And they are not growing at as fast a rate as they were before.”
Mr Morrow, who previously ran Vodafone in Europe, said Telstra was in a difficult position.
He said the telco was under pressure to continue lifting customer numbers to support its share price.
But equally, it needed to ensure its strategies to maintain market share did not erode profitability.
“The shareholders are saying ‘well listen, I am going to start to discount you in terms of future growth if you can’t accelerate at the same level as you have with competition coming back into the marketplace’.
“And so Telstra is panicking, as it is a typical issue for an executive to say ‘how can I continue with that growth? And are prices the answer?’’’
While Mr Morrow was only two years into his three-year turnaround program, he said he was confident Mr Berroeta — whom he helped select — was the right person to take over.
The basics of Vodafone’s recovery were bedded down, he said. “I don’t think it could go very wrong,” he said.
“The one thing that is still uncertain is the speed of the recovery — that has variables in it now.
“I think the worst case is it just plateaus into a neutral state.
“I think the best case is it has a rock star year.’’
He said Vodafone would continue to challenge Telstra.
Mr Morrow singled out Vodafone’s data plans as key to the challenge, saying they were better value, and a greater emphasis on the Tasmanian call centre, which expanded under his reign.
“I think you’ll see more value being offered to the consumer in particular around the data services which is what the customers are screaming for,” he said.
“I think that is going to cause a reaction from Telstra — they’ll know they have to up the game.’’
He will be telling his successor to expect a fight. “Telstra is a behemoth in the market. David Thodey and that management team has done a fantastic job and I am envious, trust me,’’ he said.
“But because they have such a significant market share and are such a major market player, if they wanted to trump the market they could — like in 2010 when the price war started.
“That part weighs on me.’’
He also sees second-placed Optus fighting harder, particularly after dropping market share last quarter.
Mr Morrow came to Australia two years ago as Vodafone bled customers, eventually losing more than one million, after a network meltdown in 2010.
Among major structural changes, the telco closed its Indian call centre and expanded in Tasmania to send a clear message it was serious about customer service.
It also invested heavily in what was a much-derided network. December was the first month Vodafone did not lose customers since the system meltdown.
Mr Morrow said the biggest achievement of his time in Australia was helping return competition to the sector by reviving Vodafone.
“I think any time there is price movement in the marketplace where a competitor is going to respond, it is good for the consumer,” he said.
“I do think it is going to result in better value given to consumers across the board.”
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