Feeds

Vodafone besieged by short termists

Just when it needs lateral thinking

The essential guide to IT transformation

Instead, it needs to replace Verizon with something, perhaps smaller but with growth potential, that enables it to have control of the equipment, name and branding.

That situation highlights two dilemmas for Vodafone. First, does it need to be a global operator and if so, what is the best route forward in the world’s largest market, the US?

And second, convergence means that it has reached the pinnacle of its power and is in danger of racing downhill as the ‘mobile-only’ tag becomes a burden rather than the huge advantage it was a few years ago. Can Vodafone play in convergence without having its hands tied unacceptably by partnerships with wireline operators? On the first point, procurement power and support for multinational enterprises are just two reasons why there are still advantages to being a superpower. Even if we assume that the restive investors will eventually get their way, and that there would be benefits to breaking with Verizon, Sarin is right not to throw the baby out with the bathwater – the Verizon stake is profitable and generates major cashflow and is likely to get more valuable in 2006-7 as its US parent emerges from stagnation to be the most dynamic of the Bell operators.

The US market still has growth, with 70 per cent mobile phone penetration, compared to 100 per cent-plus in some of Vodafone’s core territories, such as Italy and Germany, which were poor performers in its Q3 figures.

New approaches

In the mean time, Vodafone could look for a more creative medium term route to remaining a player in the US market. It could take the obvious route of buying another cellco, but there few left on offer – Cingular is too large; T-Mobile has poor coverage and no 3G as yet; Sprint Nextel would be a dream match apart from different network choices, steeply rising value and no real motivation to sell.

Instead, Vodafone could learn some lessons from Sprint Nextel, which is using a combination of wireless technologies to seek to create a converged triple play of its own to challenge the Bellcos.

The US company is showing how it will be possible in future to have wireless-only fixed/mobile broadband convergence and multimedia, and if successful, it could restore the lustre to the ‘wireless only’ label and so, indirectly, benefit Vodafone. The UK giant is better positioned than any other to create a wireless-only converged model, with its buying power, R&D resource and brand, and this may well be its route to growth in the saturated markets, whether it uses an HSDPA with enhanced indoor coverage, WiMAX or some other combination of technologies. Such a strategy would put Clearwire firmly into Vodafone’s acquisition sights. In the game of fantasy operator, buying Clearwire for its 2.5GHz network and T-Mobile plus a handful of regional carriers for cellular would not be a bad way to piece together, Sprint Nextel-style, a system that would be greater than the sum of its parts in terms of US market presence and shareholder value.

Any deals in mature markets will be hard to do in the current investor climate though. Sarin labors under the reputation of being a ‘big deal man’ who wants to follow in predecessor Chris Gent’s footsteps and make huge acquisitions for Vodafone. Ironically, this reputation continues to hold him back, ensuring he is always regarded warily by his timorous shareholders, even while he has actually made only the most cautious of purchases during his reign.

Whether he goes or stays, Vodafone desperately needs to stand up to its exceptionally short termist shareholders, who complain that the company is treated as a utility stock while being entirely unwilling to take on the risk that goes with achieving greater growth and dynamism in a market as treacherous as mobile communications.

Wireless-only convergence, selected wireline partners in markets where this is impossible for competitive or regulatory reasons, rapid growth in new economies – such a combination could be a powerful prescription for putting Vodafone and its share price back on track. The global footprint ambition should not be too hastily discarded, just achieved using different means and ones that, in the twenty first century converged world, may create greater shareholder return. One thing the investors should realize, however – Vodafone will need daring and creativity to remain on top, not short term thinking and a refusal to take risk.

Copyright © 2006, Wireless Watch

Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.

Next gen security for virtualised datacentres

More from The Register

next story
6 Obvious Reasons Why Facebook Will Ban This Article (Thank God)
Clampdown on clickbait ... and El Reg is OK with this
No, thank you. I will not code for the Caliphate
Some assignments, even the Bongster decline must
Kaspersky backpedals on 'done nothing wrong, nothing to fear' blather
Founder (and internet passport fan) now says privacy is precious
TROLL SLAYER Google grabs $1.3 MEEELLION in patent counter-suit
Chocolate Factory hits back at firm for suing customers
Mozilla's 'Tiles' ads debut in new Firefox nightlies
You can try turning them off and on again
Facebook to let stalkers unearth buried posts with mobe search
Prepare to HAUNT your pal's back catalogue
Sit tight, fanbois. Apple's '$400' wearable release slips into early 2015
Sources: time to put in plenty of clock-watching for' iWatch
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.
Backing up Big Data
Solving backup challenges and “protect everything from everywhere,” as we move into the era of big data management and the adoption of BYOD.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?