The Week: Broken Eggs

Vodafone has reported that over the last year its Australian division has shed another million customers. At the end of the March 2013 quarter the company still had about six million customers, while at the same point this year it has fewer than five million. Wasn't this supposed to be a company whose fortunes are turning around, all thanks to Bill Morrow?

Morrow was brought in as CEO of Vodafone Hutchison Australia (VHA) in March of 2012, specifically to reverse, or at any rate slow, the telco's accelerating decline. This dive attained terminal velocity in the middle of 2011, when a series of network disasters and customers service cock-ups combined to irreparably soil the brand.

Among other things, it provided a salutary lesson in why businesses must have sound fundamentals and place customer needs foremost. It also provided nourishment to those who overestimate the importance of social media, and ensured that the ubiquitous Samuel Johnson would be kept in voiceover work for the foreseeable future. There have been network guarantees a-plenty, twee ad-campaigns, and generous double-data offers. None of it seems to have helped.

Morrow had extensive previous experience as CEO of Vodafone Europe, Vodafone UK, Japan Telecom and several American organisations, including Pacific Bell. The prevailing narrative is that his time at the helm of VHA was instrumental in achieving the almost impossible task of re-energising the brand, and winning back customers.

Most recently he was appointed CEO of NBN Co, which was generally regarded by the Australian tech sector
as a reasonable, or even commendable, appointment. However, it has seemed to Dog and Bone that the prevailing optimism towards Morrow's appointment to NBN Co relied in large part upon perceptions that he'd done a sterling job at Vodafone, although the fact that he simply isn't Ziggy Switkowski should not be discounted.

I've never seen much real evidence that Morrow's time at Vodafone achieved all that much, aside from the deployment of a new LTE network. Dog and Bone primarily operates in the business and corporate spaces, and we've always found Vodafone to be a hard-sell, even before the problems of 2011, although they certainly didn't help. While our customers are interested in cost-reduction, they are more interested in performance and reliability, and would rarely consider Vodafone's bargain-basement offerings.

They certainly weren't swayed at all by the tendentious claims Morrow made on his own behalf: “We are seeing the brand perception scores go up, we are seeing our customer numbers go up, we are seeing growth come back into the business. So this is not an issue of it being too hard; it’s not an issue of bailing out or giving up on anything. I think you are going to see that in the results in the future.”

What he failed to mention was that a portion of that growth was due to widespread lay-offs - let's call it 'streamlining' - and that VHA's decision not to participate in the mobile spectrum auction will almost certainly have profound long-term ramifications. Telstra and Optus now own most of the highly-prized 700Mhz spectrum, and will no doubt be determined to buy up the remaining third when it is offered. Now these recent results show that customer losses aren't even slowing. The decline continues unchecked, and for those of us who believe Australia's telco sector needs a third strong player, this is no cause to celebrate.

Having prepared omelettes myself, I can vouch that you must break a few eggs to make one. But to quote Panait Istrati: "All right, I can see the broken eggs. Where's this omelette of yours?" And now Morrow is at the helm of Australia's largest ever infrastructure project - the NBN - a project that itself is looking increasingly like an explosion in a hennery.