Vodafone 2002 Annual Report Download - page 31

Increased competition may reduce market share or
revenues.
The Group faces intensifying competition. Competition could lead to a decrease
in the rate at which the Group adds new customers and to a decrease in the size
of the Group’s market share as customers choose to receive mobile services
from other providers.
The focus of competition in many of the Company’s markets is shifting from
customer acquisition to customer retention as the market for mobile
telecommunications has become increasingly penetrated. Customer deactivations
are measured by the Group’s churn rate. There can be no assurance that the
Group will not experience increases in churn rates, particularly as competition
intensifies. An increase in churn rates could adversely affect profitability because
the Group would experience lower revenues and additional selling costs to
replace customers, although such costs would have a future revenue stream to
mitigate the impact.
Increased competition has also led to declines in the prices the Group charges
for its mobile services and is expected to lead to further price declines in the
future. Competition could also lead to an increase in the level at which the Group
must provide subsidies for handsets. Additionally, the Group could face increased
competition should there be an auction of additional 3G licences in jurisdictions
in which a member of the Group already has a 3G licence.
Regulatory decisions and changes in the regulatory
environment could adversely affect the Group’s business.
Because the Group has ventures in a large number of geographic areas, it must
comply with an extensive range of requirements that regulate and supervise the
licensing, construction and operation of its telecommunications networks and
services. In particular, there are agencies which regulate and supervise the
allocation of frequency spectrum and which monitor and enforce competition
laws which apply to the mobile telecommunications industry. Decisions by
regulators regarding the granting, amendment or renewal of licences, to the
Group or to third parties, could adversely affect the Group’s future operations
in these geographic areas. The Group cannot provide any assurances that
governments in the countries in which it operates will not issue
telecommunications licences to new operators whose services will compete with
it. In addition, other changes in the regulatory environment concerning the use
of mobile phones may lead to a reduction in the usage of mobile phones or
otherwise adversely affect the Group. For instance, law enacted in New York
state makes it unlawful for a person to operate a motor vehicle while using a
mobile phone, unless the phone can be, and is, operated without the use of the
driver’s hands. Additionally, decisions by regulators could adversely affect the
pricing for services the Group offers. Further details on the regulatory framework
in certain regions in which the Group operates can be found in “Business
Overview – Regulation”, above.
Delays in the development of handsets and network
components may hinder the deployment of new
technologies.
The Group’s operations depend in part upon the successful deployment of
continuously evolving mobile telecommunications technologies. The Group
uses technologies from a number of vendors and makes significant capital
expenditures in connection with the deployment of such technologies.
There can be no assurance that technologies will be developed according to
anticipated schedules, that they will perform according to expectations or that
they will achieve commercial acceptance. Commercially viable 3G handsets may
not be available in the timeframe required, which may delay commercial launch
of 3G services. The introduction of software and other network components may
also be delayed. The failure of vendor performance or technology performance
to meet the Group’s expectations or the failure of a technology to achieve
commercial acceptance could result in additional capital expenditures by the
Group or a reduction in profitability.
The Company’s strategic objectives may be impeded by the
fact that it does not have a controlling interest in some of
its ventures.
Some of the Group’s interests in mobile licences are held through entities in
which it is a significant but not controlling owner. Under the governing
documents for some of these partnerships and corporations, certain key matters
such as the approval of business plans and decisions as to the timing and
amount of cash distributions require the consent of the partners. In others, these
matters may be approved without the Company’s consent. The Company may
enter into similar arrangements as it participates in ventures formed to pursue
additional opportunities. Although the Group has not been materially constrained
by the nature of its mobile ownership interests, no assurance can be given that
its partners will not exercise their veto power or their controlling influence in any
of the Group’s ventures in a way that will hinder the Group’s corporate objectives
and reduce any anticipated cost savings or revenue enhancement resulting from
these ventures.
Expected benefits from investment in networks, licences
and new technology may not be realised.
The Group has made substantial investments in the acquisition of 3G licences
and in its mobile networks, including the rollout of 3G networks. The Group
expects to continue to make significant investments in its mobile networks due
to increased usage and the need to offer new services and greater functionality
afforded by 3G technology. Accordingly, the rate of the Group’s capital
expenditures in future years could remain high or exceed that which it has
experienced to date. The Group’s mobile telecommunications interests in
Australia, Belgium, France, Germany, Greece, Italy, Japan, Malta, the
Netherlands, New Zealand, Poland, Portugal, Spain, Sweden, Switzerland and
the United Kingdom have been awarded licences in the auctions for 3G mobile
spectrum in their respective markets. Auctions or other allocation procedures for
3G licences are also currently taking place or are planned in other countries.
Risk Factors
Risk Factors Vodafone Group Plc 29Annual Report & Accounts and Form 20-F