Vodafone to Extend Google Android Billing in App Fight-Back

Vodafone Group Plc (VOD), the world’s largest mobile phone operator, will extend an application billing deal with Google Inc. (GOOG)’s Android system across all its markets to regain lost ground in additional data services.

“We’ve done a deal that covers the global footprint,” Tobin Ireland, Vodafone’s commercial development director, said in an interview. The company, which also held talks with Microsoft Corp. (MSFT) about its Windows Phone 7 mobile-phone system, aims to get deals with all application stores, he said.

Vodafone last week unveiled plans to enable payments for Android online services through its own billing system in the U.K. and Germany, allowing clients to pay for applications for everything from music, restaurants and games, to the weather and news, without entering credit card details with Google.

Operators are aiming to drive sales from additional services and boost smartphone sales after they lost the battle for online app stores to Apple Inc. (AAPL) and Google. The worldwide market for games, entertainment and workplace tools for mobile devices may balloon to $40 billion by 2014, compared with $14.3 billion in 2010, according to consulting firm Booz & Co.

“They are rapidly appreciating that it is the basic connectivity and getting punters to pay up for the amount of data that they consume which is the real growth sector,” said Morten Singleton, an analyst at Investec Securities in London.

Data Shift

Vodafone shifted away from competing directly with the app stores about 12 months ago, Ireland said, adding that the company has focused on boosting data sales from smartphones. The company’s annual sales from mobile data have climbed to more than 5 billion pounds ($8.3 billion.)

The British operator will focus on deals with the existing systems due to their “predominance,” rather than build its own direct platform in partnership with other operators, Ireland said.

Vodafone rose 0.8 percent to 165.95 pence in London trading as of 9:25 a.m. Before today, the stock had lost 0.7 percent this year.

For Google, which has also signed single billing deals with U.S. carriers including AT&T Inc. (T) and Japan’s Softbank Corp., the deal may drive the take up of paid-for apps within Android, said Bengt Nordstrom, the CEO of Stockholm-based consulting company Northstream AB.

Apple Challenge

Apple isn’t currently interested in billing deals with operators, Ireland said. The Cupertino, California-based company gets revenue directly from apps sold through its iTunes Store and App Store and said those sales rose 29 percent to about $1.6 billion in the three months through June from a year earlier.

Android, the most popular operating system, accounted for 43.3 percent of the smartphone market last quarter, according to research firm Gartner Inc. Apple had an 18.2 percent share.

Vodafone, based in Newbury, England, has also rolled out billing deals with Nokia Oyj (NOK1V) and Research in Motion Ltd. (RIM) In the U.K., the number of games and apps sold since May with RIM has doubled with more than 70 percent of sales from direct billing, Ireland said.

“Everyone strategically wants these app stores to be as vibrant and as powerful as Apple has been, but there’s a bit of a gap today in terms of the number of users and the money you can make,” Ireland said. “But I think that will change.”

To contact the reporter on this story: Jonathan Browning in London jbrowning9@bloomberg.net.

To contact the editor responsible for this story: Kenneth Wong in Berlin at kwong11@bloomberg.net

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