FT 2/4 CONSEQUENCES: Rivals await the shockwaves
By Alan Cane
The shockwaves that jolted the mobile phone industry last year when Vodafone acquired AirTouch of the US may be about to strike again - but with far greater force.
Vodafone AirTouch and Mannesmann are now the third largest telecommunications operator by market value with resources to take on groups such as AT&T and Deutsche Telekom.
On top of this, according to Mark Bruneau of the US consultancy Renaissance, the merged group should be capable of competing with global alliances including AT&T and British Telecommunication's Concert.
The merged group is expected to spark off a fresh round of consolidation.
The share prices of likely targets - the UK-based operators Colt Telecom and Energis, for example - have risen.
Colt was up 15 per cent on Thursday, while Energis rose 14 per cent. Both are attractive because they own networks.
One analyst said: "The Vodafone deal shows that scale and scope are becoming more and more important."
While it is remarkable that no other cross-border group has emerged to match Vodafone's ambitions, it would be unfair to conclude that companies including Telecom Italia Mobile, France Telecom or BT Cellnet have been left on the sidelines.
John Jensen, analyst with Salomon Smith Barney, said: "I don't believe that some of these companies have been left behind forever."
The two-month takeover battle has also served to highlight the importance of management control and ownership. Control gives a company the ability to dictate the design and quality of its networks and establish technology "platforms" or standards.
Giants have first pick of promising new technologies and can influence the direction of the industry.
Control and ownership are crucially important if groups are to compete in the world of mobile internet.
One analyst said on Thursday: "This is not about the GSM market; it is about third generation."
GSM is the common technology used by mobile operators across Europe. It makes "roaming" across national boundaries possible.
Third-generation technology, expected after 2002, will give subscribers access to all the information on the internet.
The emergence of Vodafone-Mannesmann presents little immediate threat to its competitors. But it does extend the operator's control of its assets.
Matthew Lewis, telecoms analyst with the Daiwa Research Institute, noted that content providers were drawn to the largest distribution channels - and Vodafone's deal with Mannesmann is compelling.
However, control is not a simple issue. Europe's spaghetti of alliances and partnerships is riddled with pre-emption rights.
Vodafone's rivals may take comfort from the fact that some observers believe size alone is not enough.
One said: "You need to move at internet speed to win in this competitive market place. Will this larger structure help it move more quickly or not?" |
