Fireworks over Sydney harbour


Vodafonewatch
This release
: #168
September 2018: 46pp
Releases/year: 10+
Click for more details of this release

EXECUTIVE BRIEF

GROUP: Read preps another layer of savings [p.6]

  • Tower power

DEALS: Read continues to trim ex-Euro squad [p.9]

  • Table: VHA and TPG financial and KPI comparison
  • Table: The new entity’s convoluted ownership
  • Ditching the awkward squad

NETWORK: Group lays out 2019 NBIoT goals [p.16]

  • Still a lot of NB‑IoT loose ends
  • Panasonic partnership progressing

Table: People movements [p.19]

GERMANY: Vodafone rams EWE with lawsuit [p.24]

  • EWE‑turn?

NETHERLANDS: Ericsson gets another network services ‘in’ [p.26]

  • VfZ gets breather on proposed cable regulation
  • VfZ opens door to DOCSIS 3.1

PORTUGAL: Huawei and Vodafone complete next phase of BNG tests [p.32]

VODAFONE HUTCHISON AUSTRALIA: VHA bristles at Huawei, ZTE exclusion from 5G [p.36]

  • It’s not just 5G
  • Under the influence?

 VODACOM GROUP: DOCOMO Digital knits Vodacom Airtime to Google Play [p.40]

 FURTHER READING

 INDEX

A

Accel Partners 41

Aditya Birla Group 18

 - Idea Cellular 18

Africa 35, 38, 39, 40, 43

 - Burkina Faso 38

 - Congo 17

 - Egypt 17, 37, 43

 - Ghana 17, 38, 43

 - Ivory Coast 38

 - Kenya 17, 19, 41

 -- Lesotho 17

 - Mozambique 17

 - Nigeria 17

 - South Africa 16, 20, 31

 - Tanzania 17, 43

 - Togo 38

Alcatel-Lucent 18

Amalgamated Telecom Holdings (ATH)

 - Vodafone Fiji 8, 13

Americas

 - Argentina 42

 - Brazil 14

 - Chile 14

 - Latin America 14

 - North America 13, 21

 - Peru 14

 - South America 14

 - USA 8, 21

Asia-Pacific 13, 20

 - Australia 9, 10, 11, 12, 13, 14, 16, 31, 36, 37, 38, 42, 43

  -- FIRB 9

  -- NBN 11, 38

 - China 31, 36, 37, 38

  -- Government 38

 - Fiji 38

  -- Commerce Commission 39

 - Hong Kong 12

 - India 6, 8, 12, 13, 17, 18, 31

 - Malaysia 13

 - New Zealand 12, 16, 17, 21, 39, 43

  -- Commerce Commission (New Zealand) 39

 - Singapore 10

Australian Competition and Consumer

 - Commission (ACCC) 9

Axiata Group Bhd (TM International) 18

 - India (Idea Cellular, see also Aditya Birla) 13, 18

B

Bank of America 10

 - Merrill Lynch 10

Barclays plc 8

Bharti Group

 - Indus Towers 8

British Broadcasting Corp. (BBC) 43

BT Group 33

BUONGIORNO S.p.A. 40, 43

C

China Mobile 31

China Telecom 31

China Unicom 31

Cisco Systems 7

D

Datora Telecom 14

Deutsche Bahn 18

Deutsche Bank 10

Deutsche Post 18

Deutsche Telekom 25

 - Europe 25

  -- Netherlands 31

 - Germany 24, 25

DHL Worldwide Express 18

DIEHL Metering 18

du (Emirates Integrated Telecommunications) 20

E

Entel PCS 14

Ericsson 7, 17, 18, 26, 27, 31, 42

Ernst & Young 19

Europe 7, 9, 12, 13, 17, 22, 28, 29, 31, 42

 - Albania 17

 - Austria 26

 - Czech Republic 7, 16, 27, 31

 - Germany 7, 16, 17, 18, 19, 24, 25, 26, 31, 40, 42

 -- Bundeskartellamt 25

 -- BNetzA 24, 25

 -- Federal Cartel Office 25

 -- Länder

 --- Bavaria (Munich) 25

 --- Bremen 24

 --- Hamburg 25

 --- Lower Saxony (Hanover) 24

 --- North Rhine-Westphalia (Düsseldorf) 18

 - Greece 16, 20, 21

 - Hungary 7, 16, 19, 26, 31

 - Ireland 16, 26

 - Italy 6, 16, 21, 27, 31, 40, 42, 43

 - Malta 17

 - Netherlands 7, 16, 26, 28, 29, 31,42, 43

 - Poland 26

 - Portugal 7, 16, 17, 31, 32, 43

 - Romania 7, 16, 20, 31

 - Russia 14

 - Spain 6, 7, 16, 21, 31, 33, 43

 - Sweden 26

 - Turkey 16, 31

 - United Kingdom (UK) 16, 20, 26, 31, 33, 40, 41, 43

 -- Advertising Standards Authority 33

European Union 25

 - Council of the European Union 25

 - European Commission 28, 29, 42

 - European Court of Justice 27

 - European Parliament 25

EWE

 - EWE Tel 24, 25, 42

F

Fujitsu 39

G

Goldman Sachs 6, 42

Google 33, 40, 43

 - Google Apps 33

 - Google Play 40, 43

GSM Association (GSMA) 31

H

Herbert Smith 10

Huawei Technologies 17, 18, 30, 31, 32, 36, 37, 38, 43

Hutchison Whampoa 10, 12, 13, 42, 43

 - Hutchison 3G Australia Pty Ltd 10, 12

 - Hutchison Telecommunications

 - Hong Kong Ltd (Hutchinson Telecom/HTHKH/3 Hong Kong) 10

 - Vodafone Hutchison Australia Pty Ltd (VHA, (see Vodafone) 8, 9, 10, 11, 12, 13, 14, 20, 36, 37, 40, 42, 43

I

IBM 27

Indus Towers 8

ING 8, 42

K

KPN 28, 29

Kudelski Group

 - NAGRA 42

L

LG Electronics 31

Liberty Global 7, 26, 29, 31, 42

 - UPC Germany GmbH

 - Unitymedia GmbH 31

M

Macquarie Bank 10

McKinsey & Co 20

Middle East

 - Egypt 17, 37, 43

MTN 20

N

NetCologne 25

Netcracker Technology 18

Netflix Inc. 40, 43

Nokia 18, 37

 - Alcatel-Lucent 18

Norton Rose LLP 10

NTT 40, 43

 - DoCoMo 43

O

Open Network Automation Platform 18

P

Panasonic 18, 42

Q

Qualcomm 31

S

Safaricom 8, 19, 40, 41

 - M-PESA 40, 41

Samsung 20, 31

Seven West Media 20

Singapore Telecom

 - Optus (Australia) 11, 12, 13, 14

Sistema

 - Mobile TeleSystems 14

T

Techem 18

Telecom Argentina 14

Telecom Egypt 13, 37

Telecom Italia

 - Telecom Italia Mobile 31

Telkom South Africa 19

Telstra 11, 12, 13, 14

Texas Pacific Group (TPG) 8, 9, 10, 11, 12, 13, 14, 37, 42

TiVo 7

U

United Internet

 - 1&1 Internet 24, 25

UPC 20, 31

V

Vodacom Group 8, 19, 40, 41, 43

 - Congo 17

 - Gateway Communications 32

 - Group 8, 19, 40, 41, 43

  - Lesotho 17

 - Mozambique 17

  - South Africa 16, 20, 31

  - Tanzania 17, 19, 40, 43

Vodafone

 - Africa, Middle East, and Asia Pacific Region (AMAP) 17, 35, 39, 40, 43

  -- Africa 35, 39, 40, 43

  -- Asia 13, 20

  -- Australia 10, 11, 13, 14, 16, 31, 36, 37, 38, 42, 43

    --- VHA Pty. Ltd (see Hutchison Whampoa) 9, 10, 11, 12, 13, 14, 20, 36, 37, 40, 42

  -- Egypt 8, 13, 17, 37, 43

  -- Ghana 17, 38, 43

  -- India 6, 8, 10, 12, 13, 17, 18, 31

   --- Indus Towers 8

 -- Kenya (see Safaricom) 8, 17, 19, 40, 41

 -- New Zealand 8, 12, 16, 17, 20, 21, 27, 39, 43

  --- TelstraClear 20, 39

 -- Pacific 13, 20

 -- Qatar (see Vodafone and Qatar Foundation and Vodafone Qatar) 8, 13

 -- South Africa (see Vodacom) 8, 16, 19, 20, 31, 40, 41, 43

 -- Turkey 16, 31

- Europe Region 22, 42

 -- Albania 8, 13, 17, 20

 -- Czech Republic 7, 16, 27, 31, 42

 -- Germany 7, 16, 17, 18, 19, 24, 25, 26, 27, 30, 31, 40, 42

  --- KDG Holding GmbH (Kabel Deutschland) 30, 31

 -- Greece 16, 20, 21

  --- Hellas On Line (HOL) 20

 -- Hungary 7, 16, 19, 20, 26, 31

 -- Ireland 16, 26

 -- Italy 6, 16, 20, 21, 27, 31, 40, 42, 43

 -- Malta 8, 13, 17, 20

 -- Netherlands 7, 16, 20, 26, 27, 28, 31, 42, 43

  --- VodafoneZiggo 7, 17, 26, 28, 30, 31, 43

-- Portugal 7, 16, 17, 31, 32, 43

 -- Romania 7, 16, 20, 31

 -- Spain 6, 7, 16, 21, 30, 31, 33, 43

  --- Grupo Corporativo Ono (ONO) 7, 30

-- UK 16, 20, 26, 27, 31, 33, 40, 41, 43

- Executives

 -- Anns, Jonathan 19

 -- Berroeta, Inaki 10, 14

 -- Colao, Vittorio 19, 25

 -- Debreczeni, Dora 19

 -- Heeran, Fran 18

 -- Koomen, Liesbeth 20

 -- Lloyd, Dan 36

 -- Pickering, Sandra 39

-- Pous-Fenollar, Mabel 19

-- Read, Nick 6, 11

-- Stanners, Russell 39

- Ex-executives

 -- Knook, Pieter 20

 -- Shuter, Rob 20

- Group 19, 26, 42

 -- Headquarters 16

- Marketing

 -- Internet Services 20

- Partner Markets 10, 14, 19

 -- Brazil (Grupo Datora

   --- Telecom/Vodafone Brasil) 14

 -- Chile (Entel PCS) 14

 -- Fiji (Vodafone Fiji) 8, 13

 -- Hong Kong (Hutchison Telecom) 10

 -- Japan (NTT DoCoMo) 43

 -- Kenya (Safaricom) 8, 19, 40, 41

 -- Russia and CIS (MTS) 14

 -- Singapore (StarHub) 10

 -- United Arab Emirates (du) 20

- Products

 -- 360 20

 -- Liberty (Malta) 7, 26, 27, 29, 31, 42

 -- One Net 33

 -- Vodafone TV 21

Vodafone Qatar Q.S.C. 8, 13

W

Weather Investments

- Orascom Telecom

 -- Wind Telecomunicazioni 27

World Bank 38

Z

ZTE Corp. 31, 36, 38, 43

  • No let-up from incoming CEO on risk-reduction strategy outside Europe.
  • Merger of equals” agreed with upstart Australian rival TPG.
  • Vodafone’s relegation to minority, and new entity’s convoluted parentage, could cause dysfunction.
  • If manageable, though, Vodafone has long-awaited route out of Oz.

Vodafone again displayed its desperation to reduce Group exposure outside its European core, agreeing to meld Vodafone Hutchison Australia (VHA) and partner/competitor TPG Telecom.

Mooted since at least 2015 — when TPG and VHA created a refreshed infrastructure and wholesale relationship, fuelling the former’s challenger mobile strategy (Vodafonewatch, #137) — the deal sees VHA and TPG assigned near-identical enterprise value, of just under AU$ 7.5bn (£4.1bn/EUR4.7bn) each. TPG trumpeted the combination as a “merger of equals”, in a mark of the two providers’ different trajectories over the past few years.

The parties aim to complete the merger in 2019, subject to approval from TPG shareholders and regulatory authorities, including the Australian Competition and Consumer Commission and Foreign Investment Review Board.

The politics

If the merger goes through, the new entity will be named “TPG Telecom”, but the Group indicated commercial use of the Vodafone brand will continue for an undefined period, post-completion. There was no mention, however, of any broader Partner Markets-style arrangement, to give the new operator access to Vodafone’s portfolio of brand, commercial, and procurement services.

TPG Chief Executive (CEO) David Teoh will be Chairman of the merged entity, and Iñaki Berroeta, CEO of VHA, will remain in charge of day-to-day affairs, as Managing Director & CEO.

Overall, the new operator’s Board of Directors will have ten members, with Vodafone and VHA partner Hutchison Telecommunications (Australia) Limited (HTAL) contributing two directors each, plus Berroeta. TPG will assign three (Teoh himself, plus son Shane and Robert Millner, Chairman of minority TPG shareholder Washington H. Soul Pattinson and Co.), with two independent directors making up the group.

  • A side-note to the deal is that Vodafone will not inherit a presence in Singapore, and thus dodges potential complications with local Partner Markets affiliate StarHub. TPG is to spin out its Singapore mobile business to partition it from the Australian venture.

VHA was advised on the transaction by Bank of America Merrill Lynch, Deutsche Bank, and Norton Rose Fulbright — not Vodafone’s typical grouping of M&A guides. Vodafone’s statement on this aspect of the deal also suggests it was driven, to a large extent, locally — a mark of VHA’s desire to bulk up and transform.

TPG was supported by Macquarie Capital and Herbert Smith Freehills.

Bigger is better

For VHA, the combination clearly brings a much-needed scale boost. It offers the opportunity to make a more aggressive move in fibre and 5G, after repeatedly being outpunched by rivals (including TPG, recently) in mobile spectrum auctions, and remaining reliant on Australia’s troubled National Broadband Network initiative on wireline. Vodafone talked up the rationale of combining the two operators’ assets, saying it will create a “new, fully integrated” player, and a “more powerful challenger to Telstra and Optus”.

“This transaction accelerates Vodafone’s converged communications strategy in Australia and is consistent with our pro-active approach to enhance the value of our portfolio of businesses. The combined listed company will be a more capable challenger to Telstra and Optus, and will be much better placed to invest in next generation mobile and fixed line services to benefit Australian consumers and businesses. ” — Nick Read, CEO-designate, Vodafone.

On the costs side, Vodafone offered noticeably little detail of likely network and IT integration opportunities — something one might conclude came down to a desire not to bring up ghosts from VHA’s past. The Group merely cited “cost synergies from the combination of two complementary networks, rationalisation of duplicated costs, and economies-of-scale”. The fact that VHA already uses TPG transmission infrastructure, and TPG resells mobile services on VHA’s platform, will likely dilute savings potential, but ease execution risks.

VHA and TPG are not hanging about for the deal’s approval, to start collaborating to add heft on spectrum acquisition. Alongside the merger, they have formed a joint venture (JV) to jointly bid in Australia’s upcoming 3.6GHz band auction, due to commence in late-November 2018 (Vodafonewatch, #167). In future, they also aim to expand this JV to “acquire future spectrum licenses and/or facilitate various forms of efficient spectrum and network-sharing, including a shared 5G radio access network”. The JV’s formation is not tied to approval of the merger.

Both the JV and full merger offer potential to transform VHA’s piecemeal mobile airwave platform, encompassing national (but narrow) 700MHz and 900MHz rights, and largely urban-focused 850MHz, 1800MHz, and 2.1GHz assets — a key reason behind the operator’s traditional weakness outside cities. Since beginning to stockpile frequency rights in 2013, TPG has gathered up concessions at 700MHz, 1800MHz, and 2.5GHz (Vodafonewatch, #154 and passim).

Addition by subtraction

Local commentators billed the TPG combination as a “last chance” for VHA, and almost a surprise boon for Vodafone itself, considering the minimal returns it would likely have gained from a straight sale of the JV.

Still, the tie-up could just as easily be interpreted as the Group’s first step through the Australian exit door.

For the rest of this story, including full analysis of Vodafone’s shareholder position, and what the Group’s focus on a European/convergence-led core means for other OpCos, see the full September issue of Vodafonewatch.

Image: miquitos/Flickr (CC BY-SA 2.0)

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