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Is Vodafone really scaling back its global ambitions?

Vodafone has agreed to sell its New Zealand operation to a consortium of infrastructure investors for NZ$3.4bn (£1.7bn) – the same price as the aborted deal to sell Vodafone NZ to Sky Network Television. This sale comes as Vodafone is attempting to divest other global possessions, but a new focus on Europe does not necessarily mean the end of its global ambitions.

Vodafone’s CEO Nick Read has hailed the proposed selloff as good business and stated that “deleveraging” is “an important aspect” of Vodafone’s strategy. The deal is subject to regulatory approval from New Zealand’s Overseas Investment Office, but, unlike the telecoms service provider’s previous attempt to sell of its NZ operation, the sale is not expected to be blocked.

Global sale

The fact that Vodafone has previously attempted to deleverage Vodafone NZ is in itself indicative of reduced global ambitions. The sale has been agreed to in the shadow of efforts to merge Vodafone’s seemingly thwarted attempt to push through a circa €9bn (£7.8bn) merger between its Vodafone Australia joint venture with CK Hutchinson and TPG Telecom. Vodafone and TPG are appealing the decision of the Australian Competition and Consumer Commission to block the merger, and if the appeal is unsuccessful Vodafone will almost certainly seek alternative merger or sales options.

Outside Australasia, Vodafone sold off Vodafone Qatar in 2018 and in 2017 sold its holding in Kenya’s Safaricom to the Vodacom joint venture as well as selling 5 per cent of its stake in Vodacom. In India in 2018 Vodafone merged Vodafone India with Idea Cellular to form Vodafone Idea, and in 2016 it formed the VodafoneZiggo joint venture in the Netherlands. Perhaps the catalyst for the global sell-off occurred in 2013 when Vodafone sold its stake in Verizon Wireless for $130bn (£102bn).

Method not madness

On closer inspection, all of these moves have been the result of clear reasoning and/or necessity. The sale of Verizon Wireless released capital that funded Vodafone’s European expansion spree and ended an uncomfortable alliance with Verizon. The Indian merger came as Jio’s left-field free (yes, really free) mobile services offer turned what had been a money spinner into a capital intensive and regulatory complex burden. Meanwhile, South African corporate ownership legislation was the primary reason for Vodafone’s reduction of its stake in Vodacom.

Eurovision

During the same period, Vodafone has established itself as the number two player in key European markets such as the UK, Germany, Italy, and Spain with operations in multiple other markets, such as Greece, Portugal, Hungary, and Romania, as well as Turkey and Egypt. Vodafone has also agreed to acquire Liberty Global assets in Germany, the Czech Republic, Hungary and Romania for €18.4bn as it seeks to counteract falling margins with quad-play sales (broadband, mobile, landline, TV). So, as Vodafone faces falling revenues and the need to roll out 5G and either build or acquire cable/fibre broadband assets it seems inevitable that it would have to reduce its global outlook.

Global by other means

However, Vodafone is a pioneer for an alternative model of achieving global scale. Many of Vodafone’s divestments have come in the form of mergers where Vodafone remains a significant (although not necessarily majority) share holder. This ensures that Vodafone has access to networks in these countries in order to serve is multi-national customers. Even where Vodafone has sold assets, such as in New Zealand, it has signed long-term “preferential roaming” agreements. More than this, Vodafone has championed a franchise model whereby Vodafone New Zealand and even non-Vodafone branded providers such as SFR in France and Swisscom are selling Vodafone services on licence. So, while Vodafone’s future capital outlays may be Eurocentric, its vision remains global.

Report source: GlobalData. NS Tech and GlobalData are part of the same group.