Vodafone's Gent Has Internet Challenge After Netting Mannesmann
By Christine Harper
Vodafone's Gent Has Internet Challenge After Netting Mannesmann
(For a special report on the takeover, see EXTRA .)
London, Feb. 6 (Bloomberg) -- Now comes the hard part.
Vodafone AirTouch Plc Chief Executive Chris Gent has built a
start-up cellular phone business into the world's biggest wireless
company, pulled off the biggest takeover in history and created
Europe's most valuable company.
Buying Germany's Mannesmann AG sets up a whole new set of
hurdles for the 51-year-old -- and none more important than
bringing Internet services to his mobile phone customers, analysts
say. By 2004, one-third of Europeans will use mobile phones to
access the Internet for purchases or information, according to
Forrester Research.
``The focus for Vodafone is going to be an Internet
strategy,' said Jim Senko, a principal in Gemini Consulting's
media and telecommunications practice. ``From a valuation
perspective you have to be perceived as doing innovative things in
terms of e-commerce.'
Following the Mannesmann purchase, Vodafone's wireless
customers will make up about 10 percent of the world's 427 million
mobile phone subscribers.
That gives the company more than just a lot more cellular
customers -- it gives it a chance to dominate the ``mobile
Internet' in the same way that companies such as America Online
Inc. lead Web services to computer users. Indeed, it will have
more than twice as many subscribers as AOL.
Vodafone unveiled a plan to offer a global Internet access
service for mobile customers just last month, saying that
providing new services such as stock trading or travel
reservations through cellular phones could boost revenue per
customer by as much as 25 percent in fiscal 2004.
Vivendi
Last week it said it would join France's Vivendi SA, which
owns television, publishing and phone businesses, in creating a
new Internet portal -- or entry point for Web users -- for all of
their mobile phone and TV customers in Europe. Now the two are in
talks with AOL Europe, jointly owned by AOL and Germany's
Bertelsmann AG, about possible cooperation.
Deciding whether to compete with or cooperate with companies
such as AOL is going to be one of the key decisions Gent faces as
Vodafone navigates the fast-moving Internet world, analysts said.
``Either they acquire Internet content or they make some kind
of an arrangement -- Vivendi is just the beginning,' said John
Jensen, an analyst at Salomon Smith Barney who rates Vodafone
shares ``outperform.' ``AOL has been mentioned before -- I'm
sure that they will need and want to keep talking.'
On a conference call with reporters, Gent said his calendar
is filling rapidly as media and Internet companies seek to talk to
him about possible wireless online businesses. He's also said he's
negotiating with Bell Atlantic Corp., Vodafone's joint venture
partner in the U.S.'s biggest mobile phone business, about
creating a portal for their wireless customers in the U.S.
While the new company's sheer size will help it attract
potential Internet partners, it could also endanger the business,
analysts said. Vodafone will have to try to maintain the
entrepreneurial spirit that helped it win the mobile war in the
U.K. against British Telecommunications Plc after the two
companies won licenses in the early 1980s.
Taking Risks
``What Vodafone can't afford to do is to become a big
bureaucratic organization that's slow in its decision-making,'
Gemini's Senko said. ``It's the smaller start-up companies that
need to focus on fresh innovative ideas because they have nothing
to lose by taking risks -- when you get bigger perhaps your risk-
taking reduces.'
Keeping and attracting the brightest and most innovative
executives -- as well as those who excel in traditional management
disciplines such as customer service -- will have to be a key part
of Gent's efforts, analysts and investors said.
``Just keeping everyone happy at Mannesmann and hopefully
securing middle management there in terms of loyalty is a job
itself,' said Michael Nicol, who helps manage 750 million pounds
($1.19 billion) in assets for Edinburgh-based Scottish Value
Management, including stock in both Vodafone and Mannesmann.
``They have to keep them incentivized.'
Finally, the Mannesmann purchase risks distracting Gent from
his clear focus on mobile phone customers and mobile phone
customers only, analysts said. Gent will have to spin off an
engineering business and figure out how to manage the traditional
phone businesses that it's acquiring in Germany and Italy.
``There is a huge change in the core business,' said
Scottish Value's Nicol. ``There is a lot of work to be done.' |
