Vodafone's pragmatism still resonating

Emika Obiodu/Ovum
22 Feb 2013
00:00

Recent press speculation that Vodafone is interested in buying Kabel Deutschland should not be big news. However, it has gained a lot of attention because until recently Vodafone was regarded as a mobile-only telco.

It used to be fairly straightforward to predict what Vodafone would do. It wanted to be big, and was a buyer of assets rather than a seller. It also didn’t do fixed telecoms, TV, or cable. However, this is no longer the case.

Under its current management, Vodafone’s actions are less ideological and the group has made significant efforts to adapt to changes in the industry. Vodafone has sold assets where it deems necessary and has shied away from making acquisitions that some expected it to pursue. The group’s mobile-only mantra has also been shelved and its infrastructure-light strategy for fixed telecoms has been rethought.

If the Kabel Deutschland deal happens, Vodafone will become the largest TV provider in Germany – an outcome that would have been unthinkable a few years ago. Vodafone’s pragmatism provides further evidence that European telcos are now in survival mode, and that anything that helps them to overcome the challenges they face is fair game.

Vodafone’s pre-2005 success was driven by ideological purity

Vodafone took off on its pre-2005 acquisition spree with gusto. It purchased assets wherever it deemed fit and projected itself as the first truly global telecoms brand, gaining a presence in nearly every continent in the world. The $183 billion Vodafone-Mannesmann deal, which was closed in 2000, still represents one of the biggest deals the telecoms industry has ever seen.

These achievements weren’t merely due to luck. Deprived of a national culture (as it wasn’t an appendage of its national government like many of its incumbent peers), Vodafone created a go-getting organizational culture and was led by an entrepreneurial CEO. The group also crafted a focused strategy that sought to exploit the emerging opportunities in mobile telecommunications.

It helped that Vodafone did not have a fixed telecoms legacy business to defend as this enabled the operator to aggressively pursue mobile without having to worry about cannibalizing existing revenue streams. Most of the ideological perceptions that came to represent Vodafone emanated from these times. For example, the mobile-only mantra made Arcor’s fixed telecoms assets look out of place. The quest for a larger footprint led to minority stakes around the world and laid the foundation for Vodafone’s extensive partner networks scheme.

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