What Management Would Prefer You Didn’t Know About Vodafone Group plc

Mobile phone technology is phenomenal. Call me a grandpa, but I still get a kick out of calling abroad on my mobile. I understand that it’s all powered by satellite technology, but it still boggles the mind.

Despite the fascinating technology, us human beings can be guilty of taking even the greatest of advances for granted. Indeed you can actually measure just how happy or otherwise customers are with their mobile service.

Before we get into the stats, let me give you two brief examples of mobile service providers behaving badly. Ultimately I want to show you that this whole business is very much a two-way street.

When your luck runs out

The first example involves a Welsh school teacher. The Guardian reported that his mobile phone was stolen from him while holidaying in Barcelona. He claims he called the Vodafone Group plc (LSE: VOD) (NASDAQ: VOD.US) emergency contact number after he realised the phone had been stolen, but the company has no record of that call. As a result he’s been told he must pay a £15,000 bill — run up by the thief who used the phone to make expensive calls.

The second example involves an NHS worker from Brighton. She’s been told by Vodafone that she must pay a £5,800 bill after her phone was stolen, again in Barcelona. She tried to ring Vodafone’s lost and stolen number after the incident but says she could not get through.

I thought you cared

On the surface Vodafone’s response seems appropriate enough. A company spokesperson said “we encourage customers to report phones missing as quickly as possible” — at which point the company will suspend the service.

The problem, of course, is that it’s not always possible to make that report — especially if one is left stranded or injured. That’s why in March 2012 Ofcom asked providers to come up with plans to introduce caps on customers’ monthly bills. The companies, however, managed to avoid the request by making a series of challenges.

The reason for Vodafone’s resistance is simple — it doesn’t want to lose money.

I know most people think annual reports are boring, but if you look closely at them you kind find some really interesting stuff. In fact, deep into Vodafone’s report the company comments on the risks that mobile customers face, highlighting that with a higher proportion of people paying their bills by automated bank transfer or credit card, there are greater financial risks facing customers. Still there is no mention of any measures to combat this risk.

The mobile phone service provider also comments on the regulatory and political pressure its facing. It even concedes that the cost of delivering direct benefits to consumers, and protecting consumers’ interests, can lead to adverse impacts on its business. It goes on to say that “authoritative and timely intervention is made at both national and international level in respect of legislative, fiscal and regulatory proposals which we feel are not in the interests of the Group.”

All stakeholders are important

According to Ofcom, Vodafone’s customer service statistics have improved, but it’s coming off a low base. Overall customer satisfaction in 2009 was just 69% (the sector average was 69%). In 2012 it fell to 61% (with a sector average of 67%). Finally in 2013 it rose to 77% (75% was the average). That pick-up in customer service satisfaction tied in directly with a broad rise in the company’s stock price. In other words happy customers seems to be correlated with a rising share price. Not surprising really.

I’m sure management at Vodafone would prefer you didn’t know that it appears that the business puts its own interests ahead of customers. The obvious problem is that the company is clearly only harming itself by not following basic common sense. The competition for mobile customers is only hotting up in Britain — with very little product differentiation between providers. I’d like to argue that the long term survivors in this market (dealing with identity theft and data security concerns) will be the companies that make a big effort to protect mobile phone users, not the other way around.

Bright future

Are you looking for a company with a bright future? Or maybe you're looking for a company that will do everything in its power to balance the needs of its stakeholders? Well the Fools have been hard at work for you and have come up with a small list of companies that have healthy balance sheets, dominant market positions, and reliable cash flows. It's also free of companies that have major on-going concerns.

Allow me to introduce, The Fool's Five Shares To Retire On. In the 'old days' you would pay money to a broker to give you this sort of advice. Nowadays you simply click on a link, and  list of companies for you to consider appears!

This report is FREE and it's all yours if you click here.

David Taylor has no position in any shares mentioned. The Motley Fool UK has recommended Vodafone. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.