How we create value

External environment

At the beginning of the financial year we looked once again at the environment in which we operate.

From our analysis it emerged that the following four developments have an impact on Vodafone:

  1. The economic environment: an unstable eurozone, numerous new laws and regulations in the Netherlands and uncertainties concerning legislative procedures that affect the telecom sector.
  2. Increasing focus on sustainability and the reputation of the sector.
  3. The competitive market: new entrants, the spectrum auction, innovations such as big data and machine-to-machine technology.
  4. Changes in consumer behaviour: consumers are getting older and have less income. Developments in social media, real-time information and greater concerns about privacy mean that consumers are better informed and have high expectations.

Based on the analysis of our environment, we have selected the developments in the market and in society that have a major impact on Vodafone. The analysis was partly based on research conducted amongst our most important stakeholders. We will explain what each development means for Vodafone, what risks and opportunities it entails and how Vodafone will respond.

Stakeholder study

  • Based on the materiality matrix, we have determined the most important issues for our internal and external stakeholders. These are non-transparent marketing, sales and communication, chain responsibility, security of the network and databases, quality of the network, privacy and security, radiation and health, and facilitating CO2 savings for other sectors.
  • For each stakeholder, the stakeholder overview explains why it is important to engage the stakeholder, what is important for the stakeholder and how we have engaged the stakeholder.
Stakeholder overview
Stakeholder Why is it important to engage the stakeholder? What is important for the stakeholder? How have we engaged the stakeholder?
Customers

It goes without saying that our customers are essential to ensure Vodafone's continuity. By listening carefully to our customers, we develop trust and identify how we can improve the customer experience.

  • Delivering what we promise: a good, easy-to-use and fast service
  • Good value for money
  • A reliable, stable and fast network

Various studies give us an insight into our image amongst customers and the public. From these we can work out whether we are on the right track or whether we need to make adjustments.

Employees

Our employees are the heart of our organisation. Their expertise, knowledge and drive ensure that we are able to fulfil our mission of ‘enabling opportunities every day’.

  • Good training and development opportunities
  • Swift and simple business operations
  • Clear and transparent communication
  • Pleasure from celebrating successes

Vodafone examines the satisfaction and opinions of employees each year via the People Survey. We also ask employees annually about their awareness of our sustainability activities and how they rate them.

Suppliers

Suppliers and subcontractors enable us to develop our products and services. It is important that we work together to improve the sustainability of the chain.

  • An efficient collaboration
  • Being a reliable partner that pays a fair price, by means of clear agreements
  • Working together on innovations

Eight of our main suppliers in the Netherlands have performed a self-assessment.

An inventory has been drawn up of 67 of our main suppliers on the basis of sustainability risks.

Government

The telecom sector is a sector that is the subject of much discussion in political circles. Where possible, we explain our plans, points of view and actions so that politicians and officials understand the dilemmas that we have to deal with as a company and the impact that legislation can have on our sector.

  • Transparent tariffs and conditions for customers
  • A concrete energy-saving target
  • Protection of customer privacy

Regular consultation takes place with politicians and officials on various issues. In November 2012 a delegation from the Ministry of Economic Affairs was familiarised with Vodafone's energy-reduction programme. By arranging visits to sites including an antenna site, Vodafone highlighted the choices it is making in the area of energy reduction.

Experts/Opinion makers/Social organisations

Experts, opinion makers and social organisations have an important voice within society and can influence our customers' preferences.

Environmental organisations:

  • Use of green energy and energy saving
  • Development and marketing of products and services

Social organisations:

  • Chain responsibility
  • Safe products and services, e.g. for children
  • Privacy and digital rights

Universities:

Participation in research, e.g. on radiation and health, and on the life span of products

We endeavour to organise around three stakeholder dialogues on relevant, topical issues every year. In addition, we have regular contact with external experts on specific issues.

Sector

Within these associations we discuss how we can work together on sector-wide issues.

Various issues present risks and opportunities for the sector as a whole. We work together on improving our environmental impact, internet security, net neutrality, privacy, fraud and debts, and radiation and health.

We take part in regular consultations with other telecom companies during meetings of the organisations ICT Nederland, VNO NCW, MoNet and ECP-EPN.

Media

The media has an important influence when it comes to our reputation. Through the media the general public hears about negative and positive developments. It is extremely important for us to develop a good relationship with various media.

  • A swift and open response to questions
  • Opportunities to interview the management

Our spokespeople are in constant contact with the press with regard to developments within Vodafone and respond to questions concerning specific issues. Every year we conduct a survey of journalists to find out how they rate the information supplied by and the press policy of Vodafone

Market developments
    What does this mean for Vodafone?

Converging technologies

Today telecommunication, media and information technology have merged to such an extent technically that they can be delivered via copper, fibre-optic, cable and mobile networks. Devices are becoming increasingly mobile. Voice and data, fixed and mobile, internet and television - everything comes together via the IP address. The competitive playing field has also shifted drastically from mobile communication towards more international telecommunication and internet companies.

Vodafone has grown from a mobile telecommunication company to a communication company offering total solutions for mobile telephony, fixed telephony and TV. It is important that our services fit together seamlessly, securely and stably within the various technologies.

Strict regulations for the telecom sector

The telecom sector is subject to strict regulation - not only in the form of formal legislation and regulations, but also through voluntary rules of conduct and agreements.

The most important developments for Vodafone in the area of regulation are: regulation in the area of access to fixed networks, roaming, termination rates and the acquisition of spectrum licences.

 

Access regulation for the fixed market: On the fixed market there are de facto only two providers: KPN and cable providers. Only KPN is obliged to give other parties access to its network. This is not the case for cable providers. The barriers to entering the fixed market are high as it is not economically feasible for a company to create its own network with national coverage. Access to fixed networks at tariffs that make it possible to compete with existing players on the fixed market is the only way to make a choice between providers possible on the fixed market too.

Access regulation for the fixed market: Vodafone's ambition is to strengthen its position as a challenger on the fixed market. After all, without strong challengers consumers have little choice. Competition from alternative suppliers, such as Vodafone, is necessary to prevent prices for services over fixed networks becoming too high. Effective rules must, however, ensure there is a level and fair playing field.

 

Roaming: The maximum prices prescribed by the EU for calls, SMS and data are set to fall further over the coming years. In addition, from 1 July 2012, access must be given to MVNOs at regulated tariffs and, from 1 July 2014, roaming services must be offered separately from national services.

Roaming: For Vodafone this means that the income generated from roaming will drop further and further, and far-reaching and expensive changes will have to be made to systems to ensure that all requirements can be met from 1 July 2014 onwards.

 

Termination rates: The termination rates that telecom companies charge each other have fallen sharply over the last few years.

Termination rates: This means significantly less income for Vodafone for calls terminated on Vodafone's mobile network. On the other hand, it means that mobile calls terminated on fixed networks will become cheaper.
 

Spectrum licences: At the end of October 2012 licences were auctioned by Radiocommunications Agency Netherlands. A new distribution of licences was intended to promote market forces and create more freedom for innovation and opportunities for newcomers to enter the market. An important aim of the auction was to maintain effective competition over the longer term. To achieve this aim, a decision was made to lower the barriers for newcomers to enter the market and to reserve 2x10 Mhz of frequency space in the 800 MHz band and 2x5 MHz in the 900 MHz band for newcomers.

Spectrum licence: In the autumn of 2012 Vodafone acquired spectrum in the 800, 900, 1800 and 2100 MHz bands in the multi-band spectrum auction. This will enable Vodafone to further develop its position over the next seventeen years. The auction has led to major changes in the market structure. Tele2 has acquired the 800 MHz spectrum that was reserved for newcomers at, relatively speaking, a very low price.

Recession continues

The economic recession in Europe and the Netherlands is continuing. Almost 8% of people of working age in the Netherlands are unemployed. The disposable income of most Dutch people has also been falling for a number of years.

Due to the recession, Vodafone has also had to economise, resulting in jobs being lost. In contrast to many other expenses, consumers do not appear keen to dispense with telecommunication services. We are, however, seeing a shift from ordinary to SIM-only subscriptions, as customers are continuing to use their old mobile phones for longer. To help customers keep better control over their costs, we have introduced new subscriptions and are providing customers with information on how they can limit their costs. If it looks like customers will exceed their bundle, we give them an extra warning.

Competitive market

We are noticing that some consumers are shifting towards 'no frills' offerings (cheap calls with no extras) in the mobile segment. International internet services are competing fiercely with traditional telecommunication services, such as SMS, and putting pressure on turnover. In 2012 total service turnover in the Dutch market fell by -6% year on year, with prepaid falling by -16% and postpaid by -4%.

KPN was one of the first in the Dutch market to introduce a so-called 'quad play offer'. This consists of internet, calls, TV and mobile. UPC recently purchased an 18% stake in Ziggo. This has opened up the possibility of creating a single, large national cable company. Tele2 acquired 4G spectrum in the auction and announced it would be making serious investments in the Netherlands.

We want to stand out from our competitors by focusing on our core business and improving the service we provide to our customers. We are also investing widely in the quality of our mobile network (2G, 3G, 3G Dual Carrier and the next generation of networks such as 4G) as well as in integrated fixed and mobile solutions.

We are expanding our traditional communication services (calls, data and SMS) to include a wide range of new services to improve the customer experience and generate additional turnover.

 

 

Social developments
    What does this mean for Vodafone?
Climate change Our climate is changing. Extreme weather (storms and colder, warmer, wetter and dryer weather) means that the Netherlands is being confronted directly by this change. The amount of greenhouse gases in the atmosphere, primarily CO2, has increased greatly and is the cause of this climate change. According to a report by GeSI (SMARTer 2020, 2012) the ICT industry is responsible for 2.3% of the world's total CO2 emissions. The same study revealed that there is potential for the ICT industry to reduce CO2 emissions by 16.5%. This can be realised if the existing solutions are implemented in 2020. The impact of climate change on the way that Vodafone works is limited. The extra air conditioning required on a hot day is (partly) compensated for by the cold days. This is not as yet having a direct impact on our energy consumption. We have, however, had to implement measures for our Maastricht office due to the risk of the river Meuse flooding. Vulnerable equipment has been moved from the basement to upper floors. All new technical locations must be built a number of metres above Normal Amsterdam Water Level (NAP). Thanks to machine-to-machine technology, processes are becoming more efficient, as a result of which energy can be saved in other sectors.
Shortage of raw materials and e-waste The shortage of raw materials was also a topical issue last year. Rare minerals are used in the production of mobile telephones. Most people buy a new handset every two years. In many cases the old handset ends up in a cupboard unused. The handsets that are collected are recycled or sold on in a developing country. Once a handset is no longer used there it is unclear what happens to it. A reasonable assumption is that these handsets end up on a heap as electronic waste, without the metals being recovered to be reused in, for example, wind turbines, cars and mobile telephones.

The shortage of raw materials does not have a direct influence on Vodafone. Mobile telephones and network equipment have become more expensive, but not as a result of the shortage of materials. Vodafone has been active for many years in the area of recycling. Recovering metals from used network equipment helps reduce the demand for new raw materials. Now, 100% of Vodafone's network equipment is recycled or reused. The number of mobile telephones collected by Vodafone is 10% of the total number of handsets sold. This makes Vodafone one of the leaders in this area. Of the collected handsets, 13% are recycled and 87% are reused. The handsets are mainly reused in developing countries, making mobile communication affordable in these countries too. To promote the reuse of raw materials further, a collection system is also needed in the countries where reused handsets are sold. Vodafone is trying to encourage the collection of old handsets in these countries through various collaborations:

  1. Vodafone Ghana has set up the first collection system.
  2. Collaboration with Global e-Sustainability Initiative (GeSI) and other market parties in the e-waste working group to look for solutions to e-waste.
  3. A circular flow has not yet been achieved, but together with Brightstar Corp, our global partner for handset reuse, we are taking initiatives to set up collection systems. For the time being these are still focusing on Europe.
Ageing population, increasing costs of healthcare The Dutch healthcare system is amongst the best in the world when it comes to quality and accessibility. It is the Netherlands' ambition to maintain and further improve the accessibility and quality of the healthcare it provides. At the same time, we want healthcare to remain affordable. This affordability is currently coming under pressure. As a consequence of the ageing population, developments in medical technology and a changing society, expenditure on healthcare is rising. It is partly for this reason that the government has introduced market forces, which is increasing the demand for efficiency. Cutting costs and increasing the productivity of staff are two current topics. Various analyses and studies show that the rising demand for healthcare cannot be met solely by increasing staff levels. Vodafone believes that technology can play an essential role in guaranteeing the quality, accessibility and affordability of healthcare. The company offers mobile communication solutions that enable care to be provided safely and efficiently and that make remote care possible. This means, for example, that elderly people can continue to live independently for longer and medical professionals have quicker and easier access to patient information, making treatment and clinical trials cheaper.
Risks for consumers Free access to the internet is seen as a fundamental human right. An internet that is open on a global basis is a driving force for development; it offers all people, irrespective of race, origin or belief, a shared space for self-development and the free exchange of information and ideas. The same rights that people have offline must also be protected online, such as freedom of speech and the right to privacy and data protection. When it comes to the protection of human rights in relation to the internet, it is not only governments but also companies that have a role to play.

Our customers must be confident that we respect their privacy. They are entitled to the confidentiality of their communication over our network and to the careful management of their personal data. We are aware that obtaining this trust cannot be taken for granted; we have to earn it. That is why we make our customers concrete promises relating to how their privacy is handled. One of our promises is that we provide a clear and complete insight into what details we hold about our customers and what we use these for. Information on Vodafone's vision of privacy and data protection is available all in one place on our website, together with tips & tools to help our customers prevent and reduce risks that could affect their privacy.

2012 2013 en Vodafone Magazine