Vodafone 2002 Annual Report Download - page 23

Information on the Company Vodafone Group Plc 21Annual Report & Accounts and Form 20-F
In the United States, Verizon Wireless offers a nationwide US footprint under a
single brand, operating a common digital technology. Verizon Wireless sells its
service directly to customers through its own sales force and stores,
telemarketing centres and the Internet, and indirectly through arrangements with
independent agents such as consumer electronic stores, specialised cellular
stores, automobile dealers, department stores and other retail stores. In certain
markets, mobile services are sold through resellers who, pursuant to FCC
requirements, are allowed to purchase blocks of mobile telephone numbers and
to access mobile services at wholesale rates for resale to the public. The costs of
attracting new customers primarily consist of advertising and marketing costs,
costs of direct distribution, including costs related to the company’s stores,
compensation paid to independent agents or to its own sales force, and handset
subsidies.
The Group’s ventures in Japan market their products and services under
the J-Phone Vodafone brand and advertise to promote brand awareness.
Japan’s four operators depend largely on a combination of non-exclusive and
exclusive agent channels, as well as direct channels, to market their products
and services.
Business activities – Non-Mobile Telecommunications
The Company’s non-mobile telecommunications businesses mainly comprise
interests in Arcor, Cegetel, Vizzavi and Japan Telecom.
Arcor provides fixed network services in Germany and has retained its position
as the leading private operator and the strongest competitor to Deutsche
Telekom with a total market share of more than 6%, which equates to a 40%
share of the total alternative German fixed-line operator market. During the 2002
financial year, Arcor saw its contract voice customer base increase by 7% to
2.4 million customers and traffic volumes increase by 30% to over 21 billion
minutes. However, the effect of these increases was almost entirely offset by
tariff reductions, reflecting the competitive environment.
In January 2002, the contract between Arcor and Deutsche Bahn to carve out
Arcor´s railway specific telecommunication and service business into a new
company was signed, and the sale of the business to Deutsche Bahn was
completed in April 2002. See “Information on the Company – History and
Development of the Company – Sales of businesses”, for further details.
Arcor also disposed of its point-to-multipoint business, Arctel, increased its
shareholdings in three existing city carriers, ISIS, Wücom and Netcom, and
concluded the integration of the o.tel.o business into its operations, focusing on
the Arcor brand, with a view to realising future cost synergies.
Cegetel is the second largest fixed line operator in France. The company offers
broadband services in addition to fixed line services.
Japan Telecom is the third largest fixed-line telecommunications operator in
Japan, offering both voice and data services, and is the parent company of
J-Phone Co., Ltd.
The fixed line operations of Japan Telecom continue to face a very competitive
environment, following the lifting of restrictions on market entry. In particular, with
the new carrier designation service “My-Line”, which enables customers to pre-
select their local or long-distance carrier, having been introduced in May 2001,
maintaining market share in the consumer voice segment has been challenging.
In response, Japan Telecom has been focusing on high-growth business
opportunities and working to deliver innovative data products and services.
Sales of IP data related services for corporate customers have been specifically
targeted. Promotion of the next-generation IP network “PRISM”via optical fibres
has significantly expanded Japan Telecom’s corporate customer base.
Following completion of the Group’s tender offer in October 2001, management
at Japan Telecom began a corporate-wide initiative to identify and refocus Japan
Telecom on its core businesses and strengths, reallocate disproportionate
resources to the core operations, drive costs down in the business and
implement the Group’s standards of internal control. Furthermore, to enable the
company to quickly support change, the organisational structure of the company
is being realigned to centre around three customer facing business units to
ensure a swifter and more focused decision making process that will better
serve customers. Japan Telecom also intends to further strengthen senior and
mid-level management.