Where are my promised cheap Vodafone calls?

The absorption of Eircell by Vodafone is all but complete. Red has replaced purple and the group's 1

The absorption of Eircell by Vodafone is all but complete. Red has replaced purple and the group's 1.7 million Irish subscribers are now part of its global family of 100 million. Huge amounts of money have been spent on a re-branding campaign including television advertisements showing Vodafone customers in various exciting and exotic situations with captions like "I'm whoaah" or "I'm gorgeous".

The one I am waiting for is the Irish customer who believed all the hype in December 2000. It could be captioned: "I'm browned off".

At the time the takeover was announced in December 2000 there was a lot of talk about the benefits to Eircell's customers of being part of Vodafone. The most significant of which was the concept of seamless pan-European or global roaming. The theory being that Irish Vodafone customers could move from one Vodafone network to another without having to pay the sort of massive charges that currently turn up on your bill after a holiday in Spain or a trip to London.

The real winners however would be business customers and also the many thousands who commute on a regular basis between the Republic and the North, as well as the UK. But, as anyone who has used their Eircell phone outside the State recently knows, we are still waiting for this happy day.

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Vodafone of course was clever enough not to make any hard promises back in 2000, but at the same time the company was only too happy to let the impression go forth that this and numerous other improvements were only around the corner. It certainly did not demur when Mr Ray MacSharry, the Eircom chairman, said as much to shareholders at the extraordinary general meeting called in March last year to approve the sale of Eircell.

Amongst the other goodies that were going to come about as a result of "synergies" were cheaper handsets because Vodafone's massive global buying power meant it could squeeze better deals out of manufacturers. The same argument applied to the millions of euro worth of equipment that Eircell bought each year, which would allow further savings to be passed on to users.

There is not much sign of these benefits either and more fool us for really expecting them. You should always beware of something that is going to be delivered by "synergies". More to the point, within weeks of the sale of Eircell going through in mid-2000 the offices of Vodafone were raided by the European Commission as part of a Europe-wide investigation into over charging by mobile operators. Vodafone's Dutch subsidiary was included in the investigation which is ongoing.

Last week Mr Mario Monti, the European Union's competition commissioner gave an update. He said: "We have narrowed down our investigations to a number of member-states where the situation is the most serious and intend to take concrete action this year". It would not be prudent to hold your breath in anticipation of concrete action from the EU, but it will be interesting to hear what it has to say about Vodafone and of course BT which operates here as Digifone, part of MMO2. BT made similar vague promises when it took over Esat Digifone at the start of 2000.

A vignette to the Eircell takeover is afforded by the advertising campaign currently being run by its former parent Eircom. For the first time we are being told that some mobile phone calls can be up to seven times more expensive that the equivalent on a land-line. Makes you think how much money they must have squeezed out of Eircell customers when they owned it.

Vodafone's other Irish constituency does not have too much to cheer about either. The 500,000 or so former Eircom shareholders who now hold Vodafone paper have seen the share price decline steadily from around 270p sterling when the deal was first mooted to their present level of around 130p, having stopped off at close to 100p along the way. This is quite some way from the 336p sterling that is required before Eircom investors will be back in the money.

The coming months will test the other spin that was circulated when the Vodafone deal was being sold to Eircom shareholders last year. The argument in favour of doing the deal boiled down to this: all telecom stocks including Vodafone were taking a terrific pounding but when the bounce came it would be the big global players such as Vodafone which would recover first.

The stock markets may be poised for a recovery, but things don't look too hot for Vodafone at the moment. Along with its peers it hopes that revenue growth will come from data services as various new technologies are rolled out, but they are still several years away.

The real problem for Vodafone is that Average Revenue Per User is falling as the markets across Europe becomes saturated. The Christmas quarter saw the ARPU in the UK fall £7 sterling (€11.48) to £274 while the ARPU in Germany fell by €14 to €303. No figure was given for Eircell and the most recent figures we have must be gleaned from the Eircom accounts to the end of March last year. They showed revenues of €710 million and 1.52 million customers. This gives a crude average revenue per user of €467, which might explain why Vodafone is so coy about publishing figures for Eircell.

Even assuming that this figure has declined somewhat it is still well above the sort of return Vodafone is getting elsewhere. Given the company's current problems, it is hard to see it rushing ahead to kill its golden Irish goose.

Memo to Vodafone global advertising agency: New add to feature 1.7 million Irish customers. Caption to read: "we're waiting".

John McManus

John McManus

John McManus is a columnist and Duty Editor with The Irish Times