Why was Vodafone eager to get the deal done? September 2, 2013Posted by chetan in : US Wireless Market , trackback
One of the biggest mobile deals in recent memory consummated this morning with Verizon buying back its 45% stake for a cool $130 Billion. Verizon has been wanting to do this for a long time so why now? The simple lies in the figure below
As we explained in our 4th wave paper earlier this month, Without having a robust 4th Wave strategy, many operators will simply become targets of take over as they won’t be able to compete effectively. Vodafone is the second largest operator in the world and operates in 21 countries across Europe, Asia, Middle East, and Africa (in addition to sizable investment in Verizon Wireless). It is one of the progressive operators but is facing some revenue curve headwinds. It is instructive to study is 2012-13 financials to see the widespread impact on tradition growth curves and why the investment in the 4th curve is not only desired but essential for survival. Figure above plots the YOY of all the major markets Vodafone operates in segmented by the three revenue streams of voice, messaging, and access (data revenue). There was a decline in voice and messaging net-revenue in each of the markets. The data revenue stream saw growth in all but the Italian market.
However, what was more disturbing was that the increase in access revenue didn’t negate decline in voice and messaging revenues in any market. The net-revenue declined in every single market no matter which geography it belonged to. The net-effect was that the overall revenue declined by 9% despite access revenue growing by 8% because overall voice and messaging revenue streams suffered double digit losses. Once the access revenue start to decline (and it is already happening to some of the operators), to attain growth, these companies will have to take drastic actions. The investment and a clear strategy on the 4th wave becomes even more urgent.
Vodafone core markets were suffering and unless it acted, it would have struggled to stay relevant. With the infusion of cash, it will shore up its assets and is likely to go on a buying spree.