Feeds

Vodafone besieged by short termists

Just when it needs lateral thinking

Build a business case: developing custom apps

Just as the US mobile carriers are turning in storming performances, Vodafone is under unprecedented pressure to dump its 45 per cent stake in Verizon Wireless. Arun Sarin, defending his own CEOship in the face of mounting shareholder criticism, claims this would be the wrong time to get out of Verizon, since there would be greater shareholder value to be derived from waiting – perhaps a very long time. But two of the operator’s top six shareholders have gone public with criticisms of the current strategy and a call to explore an exit from Verizon Wireless, a move that could generate £25-30bn.

Standard Life, the second largest investor in Vodafone, and its sixth largest backer, Morley Fund Management, have both expressed concern about strategy. “We share the concerns of many other shareholders and are looking closely at the situation,” Morley told the Financial Times. Standard Life had already called on Vodafone to sell out of the US. David Cummings, head of UK equities at Standard Life Investments, said: “We are very supportive of a sale of Verizon. It would give a massive earnings uplift and there is a willing buyer in Verizon.” Incoming chairman Sir John Bond is currently listening to shareholder opinions prior to taking up his position at Vodafone in July.

Global brand?

There is no longer much talk of Vodafone looking for an alternative US investment to replace Verizon – one that would use the same GSM/UMTS technology, for instance, or in which the UK giant could hold the controlling stake. Since it backed away from its bid for AT&T Wireless two years ago, there has been increasingly vocal questioning of the Vodafone mantra of global brand and global footprint, some of it sparked by the poor performance of Vodafone Japan. Instead, the thinking goes, Vodafone should concentrate on growth by expanding in emerging markets such as Africa and eastern Europe - where it has made a string of relatively small deals recently – to compensate for saturation of its core western European territories. It should also, the restive investors argue, move away from ventures in which it does not have a controlling stake, such as Verizon Wireless and France’s SFR.

These two key complaints about the Vodafone strategy are not logical when taken together. If Vodafone is to become less concerned with universal brand presence, it is of less importance to have full control of all its operations, as long as these are profitable and have a strong market position in their region. Indeed, Vodafone will always, because of the power of its purchasing and partnership capabilities, have more influence on the strategy of a joint venture than its mere percentage ownership would infer. In the past, there has even been talk of Verizon agreeing to migrate from its CDMA network to support Vodafone’s chosen UMTS in the next generation – in order to take advantage of the strong procurement deals the world’s largest operator can command.

However, the universal brand is important to give Vodafone a value above being classified as a utility stock. Therefore, we believe it needs to keep its presence in key territories, but preferably with brand control. This will be particularly important as the brands of fixed line operators start to gain new approval. Vodafone is losing some of its power in partnerships as the pendulum of influence swings to operators with the networks to support fixed/mobile convergence, expected to be the basis of the most profitable business models in the coming years. Verizon is in a strong position here, and is increasingly keen, as it sees its mobile arm driving both its growth and its shift to a converged triple play, to gain full control of the wireless venture. Thus if Vodafone succumbs to shareholder pressure to sell, its partner will be a happy purchaser. And in the medium term, it might not be a bad situation for Vodafone – but not if it quits the US altogether.

5 things you didn’t know about cloud backup

Next page: New approaches

More from The Register

next story
Kate Bush: Don't make me HAVE CONTACT with your iPHONE
Can't face sea of wobbling fondle implements. What happened to lighters, eh?
Video of US journalist 'beheading' pulled from social media
Yanked footage featured British-accented attacker and US journo James Foley
Caught red-handed: UK cops, PCSOs, specials behaving badly… on social media
No Mr Fuzz, don't ask a crime victim to be your pal on Facebook
Ballmer leaves Microsoft board to spend more time with his b-balls
From Clippy to Clippers: Hi, I see you're running an NBA team now ...
Online tat bazaar eBay coughs to YET ANOTHER outage
Web-based flea market struck dumb by size and scale of fail
Amazon takes swipe at PayPal, Square with card reader for mobes
Etailer plans to undercut rivals with low transaction fee offer
Assange™: Hey world, I'M STILL HERE, ignore that Snowden guy
Press conference: ME ME ME ME ME ME ME (cont'd pg 94)
Call of Duty daddy considers launching own movie studio
Activision Blizzard might like quality control of a CoD film
US regulators OK sale of IBM's x86 server biz to Lenovo
Now all that remains is for gov't offices to ban the boxes
prev story

Whitepapers

5 things you didn’t know about cloud backup
IT departments are embracing cloud backup, but there’s a lot you need to know before choosing a service provider. Learn all the critical things you need to know.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.
Rethinking backup and recovery in the modern data center
Combining intelligence, operational analytics, and automation to enable efficient, data-driven IT organizations using the HP ABR approach.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.