Strategy Differences Emerge in Wake of Verizon-Vodafone Proposed Deal

In the wake of news that Verizon Communications and Vodafone have agreed on a $130 billion deal for Vodafone to sell its 45 percent stake in Verizon Wireless to Verizon Communications, differences in telco strategy are more obvious.

Some might say Verizon’s move essentially follows its robust assessment of growth prospects for the U.S. market. One way of looking at the matter is that Verizon sees revenue growth in the European and U.S. mobile businesses, and likes what it sees.

In Europe, wireless revenue declined 4.3 percent in 2012, while U.S. revenue growth accelerated about 9 percent, according to CTIA. 


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So it makes sense, in that view, to capture more of the value of the growth by getting full ownership of the Verizon Wireless asset.

AT&T, on the other hand, is said to be looking at global assets, indicating a less sanguine view of the U.S. market, in terms of revenue growth. Of course, AT&T has a bigger footprint in the U.S. market than does Verizon, so AT&T might reasonably conclude it has less room to grow domestically.

There are other differences as well. Vodafone has indicated it wants to buy fixed network assets in Europe, to complement its mobile assets. Basically, Vodafone wants to replicate the Verizon Communications and AT&T strategy in the United States, where those firms are able to sell quadruple play offers.

AT&T, on the other hand, is said to be exclusively interested in acquiring mobile assets in Europe, where the belief is, new Long Term Evolution networks will reignite revenue growth.

So where Vodafone is thinking quad play, AT&T is thinking “mobile only.”

Those strategy differences have become increasingly obvious in a business that once featured virtually homogenous strategies by all leading providers in the monopoly era. Since the advent of deregulation, the disruptive influence of the Internet and the rise of mobile services and video entertainment, companies increasingly have chosen distinct business models.

Vodafone originally had a “mobile only” approach but gradually has taken on more fixed network assets. Both Verizon and AT&T once were primarily fixed network service providers but have evolved to the point where mobile services drive revenue growth at both firms.

Vodafone, on the other hand, also has seen firsthand the impact of a disruptive assault from a firm such as SoftBank, which bought Vodafone’s Japan operation and proceeded to attack retail pricing levels.

“Vodafone’s management may be looking at the U.S. and saying to itself, ‘We’ve seen this movie before,’” Craig Moffett, principal of Moffett Research, has said.

At least for the moment, those differences in assessment of market potential are going to have clear impact on firm strategies.