Death of the Phone Pole: Vodafone & Verizon

I am going to leave it to others to discuss whether Verizon or Vodafone makes out better in the repurchasing of the 45 percent minority ownership of Verizon Wireless. I am certain there will be advocates for both sides. The reality, though, is that the regulatory rules were very different when the initial deal was struck and getting capital to build out the network had a structural separation component then that made the deal seem quite attractive.

Vodafone stayed out of the U.S. as a result of the original deal, which may have caused significant problems for a young Verizon Wireless. Also, the company formed alliances between China Mobile, Softbank, Verizon and Vodafone that are no longer valid, so it is quite clear that a change had to occur.

So with all of this to consider, I am going to point out how the Verizon-Vodafone deal indicates that the wireline business is now beyond the reach of life support, and how it is now only a matter of time until its inevitable demise.

First, as far as the deal goes, realizing that the 45 percent of Verizon Wireless is for $130B, while the whole of Verizon is currently valued at $135B, the value of the landline network looks to be $5B at best. Of course, considering just the hard assets - the copper, servers and trucks- the value could be somewhat more than that. However, it is clear that everything associated as wireline facilities can be easily regarded as just some kind of abandoned “Storage Wars” locker.


image via shutterstock

Secondly, it is important to look at the implications. Accepting that the locker has been opened, the implications for Verizon in the years ahead become plainly apparent, and we can expect three waves of massive layoffs to take place (recall that Verizon and Verizon Wireless had a structural separation, meaning that over the years different parts of the company came to be run under different management).

The first “synergy” will no doubt be the result of management consolidating sales, ops and back-end teams. I consider these layoffs a mixed bag of changes, and while most of the phone pole side of the company will be the victim, I believe the network core (what I know as InterOffice Facilities) will remain stable. 

The second wave of layoffs will be in field operations and OSS teams. For those of us who have been there before, we will once again see the familiar IPO (Input – Process – Output) of Process Reengineering with a rethink of KSI.   A key factor at this point will be when local loops will come to be considered a manufacture-discontinued strategy, because when it does (and it is only a matter of time), we will see...the third wave of layoffs, which will be an outside plant. I expect that many subcontractor deals will be cut and the telco on the inside will resemble the cable operators, most of who use subcontractors who proudly display the logo of the cable company for which they toil. And based on the valuations in the repurchase of Verizon Wireless, these subcontractors might even get the trucks for free…or see them in an upcoming episode of “Storage Wars”.