Wednesday, March 08, 2006

Dean Bubley: What now for Vodafone?

Dean Bubley writes at Disruptive Wireless about his take on what lies in store for Vodafone and what's wrong with the company. He thinks the problem is deeper than a management issue, but is actually a technology issue. The issue for Bubley "is that the company shows every sign of having missed the IP boat, and, importantly, how this is changing the fixed telecom world faster than the mobile world."

Bubley notes that "all of the world's most developed mobile markets have adopted ever more sophisticated fixed networks, as well as mobile. Japan and, especially, Korea epitomise this, with 100Mb home broadband and a myriad of compelling services, as well advanced handsets and 3G. Customers want both. It now appears that the France, Scandinavia, the UK and the US are starting to head the same way, with Germany and Italy not far behind."

He believes that "in all of Voda's top geographies, a standalone mobile story is looking increasingly shaky, unless it is addressing a particular niche, such as low-cost voice. For a market leader, it's looking completely untenable. It's the equivalent of a modern-day Ford telling its global customer base that they can have any colour they want..... as long as it's black."

Bubley present two options for Vodafone:

  • get serious about FMC, if it intends to be remain a player in its core markets
  • expand in emerging markets where fixed networks are of little concern
He then explores ways Vodafone can go about this by offloading marginal business and investing in one of the above two options. He then suggests that "it should take some of the $50bn+ it might get from selling its Japan and US businesses and buy some fixed operators. Given the flurry of interest around private equity investors allegedly eyeing it up, I'm surprised few observers have considered how well BT would fit into the Newbury fold."

He points out that "Vodafone already has a fixed business, in Germany, where it has a 74% stake in Arcor. Not that you'd know it - there precious little on either company's site to indicate the relationship exists, while Vodafone Germany's new ZuHause "HomeZone" service uses (ironically) BT's fixed network in the background. Contrast this with O2 and new parent Telefonica which, according to discussions I've had, are already cross-selling and bundling mobile and ADSL services in Germany."

Bubley concludes that "Sooner or later Voda is going to have to get serious about copper and fibre. Otherwise, it will be stuck as a "legacy mobile operator" and its growth confined to emerging markets."