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Vodafonewatch
This release
: #170
December 2018: 98pp
Releases/year: 10+
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Executive brief

Management update

Q2 FY18-19 [p.6]

  • Read battles to promote optimism as growth weakens
  • Table: Vodafone Group, revenue summary, Q2 FY18-19
  • Table: Mobile data usage for selected OpCos, Q2 FY18-19
  • Liberty buy is pivotal to hemmed-in Group
  • Spend: Digital Vodafone Mk II
  • Table: Europe and Common Functions opex reduction plan, FY18-20
  • Group Finance in fresh power-grab
  • Table: Vodafone guidance, FY18-19

Group

Deals: Tower move 'could include UK', after all [p.16]

  • Table: Vodafone Europe Region tower assets
  • Vodafone -- late to the party once more
  • Ireland primed
  • Tie-up may have an Italian 5G flavour

Network: Vodafone sees end of 'Huawei effect' [p.21]

  • Vodafone follows OpenRAN trail from India to Turkey
  • Table: Telefónica and Vodafone OpenRAN RFI participants
  • End of 'post-Huawei' era
  • Table: Tenorio's call for action: 2019
  • TIP faithful and followers gather in London
  • Table: TIP top-ups at a glance: Vodafone leads from the front on RANs, small cells, and optical packet transport

Partnerships: Vodafone Brasil morphs into Arqia [p.29]

  • Vodafone struggling to learn Latin
  • Partner Markets edifice continues to flake
  • Botswana signs out
  • Philippines spurned

People: Ahuja joins Board to aid Group refresh [p.34]

  • Table: people movement highlights

Products and services: V by Vodafone platform being rebooted [p.39]

Supply chain: Read speaks up for Huawei in security debate [p.41]

  • Supply chains under review
  • Germany and New Zealand also gets the Huawei jitters

Europe Region

Q2 FY18-19: Europe increasingly the 'Vodafone Germany show' [p.47]

  • Table: Vodafone Europe Region, service revenue summary, Q2 FY18-19

Germany: VfD on collision course with BNA over 5G auction rules [p.50]

  • Table: MNO moans: GSMA rundown on what's wrong with 5G auction rules in Germany
  • Go fourth, United Internet

Greece: Forthnet bids go in [p.54]

Ireland: VfIr frees more funding for SIRO JV [p.56]

  • Leadership swap

Italy: VfIt hits the Giga mark [p.58]

Malta: VfM has another GO at wireline expansion [p.59]

Netherlands: VfZ launches appeal over wholesale regulation [p.60]

  • Another blow to Vodafone and Liberty's Dutch dalliance

Spain: Game on for VfS-OnMobile deal [p.63]

UK: Skodafone back on agenda after Comcast takeover [p.65]

  • Cityfibre deal reaches double figures

Africa, Middle East & Asia-Pacific Region

Q2 FY18-19: Group burned again by volatile AMAP trends [p.69]

  • Table: Vodafone AMAP Region, service revenue summary, Q2 FY18-19
  • The De-recovery of India

Ghana: Auction begins but 800MHz still at deadlock [p.72]

India: VfI set to jettison fibre network [p.74]

New Zealand: VfNZ to shape up for IPO take two [p.76]

  • VfNZ targets IoT and security opportunities
  • VfNZ unveils Kiri chatbot
  • 'TOBification' is now a thing
  • VfNZ seeks network flexibility with more Ciena tech

Vodacom Group: Telkom roaming deal fills Cell C gap [p.83]

  • Safaricom shuffles top team to reignite growth
  • Safaricom remains frozen out of broadcast market
  • VdM gains footing to expand '4G' service
  • 3G still a priority, as Intelsat secures VdM deal

Further reading

Index

Symbols

3rd Generation Partnership Project (3GPP) 24, 89
5G Automotive Association 33

A

Accenture 25
Aditya Birla Group
- Idea Cellular 36, 70
ADVA Optical Networking 25, 28
Africa 17, 22, 32, 35, 36, 38, 68, 69, 84, 85, 93
- Egypt 9, 70
- Ethiopia 85
- Ghana 32, 72, 73, 93
-- National Communications Authority 72
- Kenya 73, 87
- Mozambique 88, 89
- Nigeria 85, 89
- Rwanda 38
- South Africa 9, 38, 70, 83, 84, 89, 93
-- Independent Communications Authority of South Africa (Icasa) 84
- Sub-Sahara 32
Afrimax Group 32
Alibaba Group Holding Ltd 71
- Alipay.com Co., Ltd 71
Altice Group 30
Amazon.com Inc. 53, 55
América Móvil 30, 32
Americas
- Brazil 29, 30, 32
- Canada 44, 64
- Chile 30
- Latin America 22, 28, 30, 32, 37
- North America 32
- Peru 30
- USA 33, 34, 35, 37, 41, 43, 44, 64, 66
Anatel, Brazil 30
Apple 53, 62, 71, 89
- iPhone 62
Aricent Inc. 25, 28
Asia-Pacific 32, 35, 36
- Australia 38, 41, 42, 44, 71, 78, 91
- China 25, 32, 41, 42, 43, 44, 71, 87, 91
-- Province/Municipality/Region
--- Beijing 43
--- Guangdong 42
- Fiji
-- Commerce Commission 77
- India 6, 18, 22, 35, 36, 63, 69, 70, 71, 74, 75, 93
-- Department of Telecommunications (DoT) 75
-- Government 74
- Japan 32
- New Zealand 38, 41, 44, 76, 77, 78, 79, 93
-- Commerce Commission (New Zealand) 77
- Philippines 32
- South Korea 32, 33
Augere Holdings (Netherlands) BV 35
Axel Springer AG 34
Axiata Group Bhd (TM International) 38
- India (Idea Cellular, see also Aditya Birla) 36, 70, 74, 75, 93
- Malaysia (Celcom (Malaysia) Bhd) 38

B

Bank of America 74
- Merrill Lynch 74
Bank of Ireland 37
BCE Inc. 28
BC Partners
- Intelsat Ltd 89, 93
Bharti Group 25, 28, 74, 75, 93
- Airtel 25, 28, 38, 73, 74, 75, 93
- Africa
-- Ghana 73
- Bharti Infratel 74, 93
- Indus Towers 74
BMW Group 33
BNP Paribas S.A. 74
Botswana Telecommunications Corp. 32
BT Group 25, 27, 28, 36, 38, 42, 57, 65, 66, 91
- Openreach 65, 66

C

Cadbury Schweppes 35
CCS Insight 81, 93
China Telecom 25, 32, 91
Ciena Corp. 28, 82, 93
Cisco Systems 25, 28, 84
Coca-Cola 75
Comcast Corp. 55, 65, 66
Conexus Mobile Alliance 32
Coriant 28
Credit Suisse 74
CyTA 54

D

Datora Telecom 29, 30, 32
Deloitte Touche Tohmatsu 25, 28
Dennis Publishing 32
Deutsche Telekom 18, 24, 25, 27, 28, 45, 53, 92
- Europe
-- Greece (see OTE) 55
-- Hungary (see Magyar Telekom) 27
-- Netherlands 61, 92
-- Poland (Polska Telefonia Cyfrowa/PTC) 37
-- UK (EE) 42, 53
- Germany 52, 53
- Investments
-- Magyar Telekom (see separate) 27
- USA 53, 91
Dixons Carphone 67
Drillisch AG 52

E

Eaton Towers 35
eBay
- PayPal 67, 71
Econet Wireless Group 73
EE (see DT, FT) 42, 53
eircom 18
Electricity Supply Board (Ireland) 37, 56
Emblaze Group
- European Telecom 33
Enel SpA 20
Entel PCS 30
Ericsson 36, 42
Etisalat 38
- Mobily 38
Europe 7, 8, 9, 10, 12, 13, 16, 17, 18, 19, 23, 32, 33, 35, 37, 41, 46, 47, 48, 49, 51, 65, 69, 71, 76, 92
- Austria 55
- Central Europe 45
- Commonwealth of Independent States (CIS) 32
- Czech Republic 37
- Denmark 64
- Finland 53
- France 19, 35
- Germany 6, 8, 9, 10, 17, 34, 37, 44, 48, 49, 50, 51, 52, 53, 55, 66, 91, 92, 93
-- Bundesnetzagentur für Elektrizität, Gas, Telekommunikation, Post und Eisenbahnen (BNetzA, RegTP, FNA, or German Federal Network Agency) 50, 51, 52, 92
--- Länder
-- Berlin 27
- Greece 9, 17, 48, 54, 55, 92
- Ireland 17, 18, 33, 38, 48, 55, 56, 57, 66, 92
- Italy 6, 7, 9, 11, 12, 14, 16, 17, 19, 20, 35, 48, 55, 58, 64, 66, 91, 92
- Luxembourg 32, 45
- Malta 59, 92
-- Communications Authority 59
- Netherlands 17, 60, 61, 62, 92
- Norway 53
- Portugal 9, 17, 48
- Romania 9, 48
- Russia 32
- Spain 6, 7, 9, 11, 14, 17, 28, 35, 37, 42, 47, 48, 49, 55, 63, 64, 66, 92
-- Comision Nacional de los Mercados y la Competencia 64
- Sweden 36, 53
- Switzerland 53, 55
- Turkey 9, 17, 22, 28, 40, 42, 69, 70, 91
- United Kingdom (UK) 8, 9, 11, 14, 16, 17, 27, 35, 36, 37, 38, 41, 42, 43, 44, 48, 49, 53, 55, 65, 66, 67, 89, 91, 92, 93
European Union 60
- European Commission 10, 33, 49, 60, 92
- European Court of Justice 60
- Eurotariff 64
Expeto 45

F

Facebook 21, 22, 25, 27, 28, 55, 79
Ford Motor Company
- Jaguar 33, 37
- Volvo 33
Forthnet 54, 55, 92

G

Gaelic Athletic Association (GAA) 33
GCSB, New Zealand 44
GlaxoSmithKline 38, 85
Google 53, 55
- Android Market 89
- Google Play 53
- YouTube 64
GSM Association (GSMA) 33, 51, 92
- Mobile World Congress 25

H

Hewlett-Packard Enterprise 27
Home Box Office 64
Huawei Technologies 21, 23, 33, 41, 42, 43, 44, 58, 62, 64, 91
Hutchison Whampoa
- Vodafone Hutchison Australia Pty Ltd (VHA, (see Vodafone) 37, 71, 78
Hyundai 33

I

IBM 53, 55, 80
IHS Inc. 55
Iliad 19
Indus Towers 74
Intel 25, 27, 28
ITV 53

J

JCDecaux Group 34
Juniper Networks 84

K

Kia Motors Corp. 33
KPN 38, 60, 61, 62
KT Corp. (KTC/KTF) 32

L

Land Rover 33, 37
Largo Ltd
- WIND Hellas 54
LG Electronics 32, 62
Liberty Global 10, 37, 49, 61, 66, 92
- UPC Germany GmbH
- Unitymedia GmbH 10, 49
- Virgin Media 37, 66
- Ziggo 92
LightSquared Co. 35
Lime Micro 25, 26, 27
LinkedIn Corp. 37, 53
Local Backhaul Networks, LLC 45

M

Magyar Telekom (see DT) 27
Mahindra Group
- Tech Mahindra 25
Market segments
- Mobile data 9, 67, 83, 86, 89
- Mobile virtual network (MVNA/MVNE/MVNO) 9, 29, 30, 51, 52, 55, 67
- M-payment 71
- Network-sharing 18, 19
- Outsourcing 18
- Over-the-top (OTT) 53
- Value-added services (VAS) 51, 55, 59, 62
- Voice 9, 33, 53, 55, 58, 81, 89
Microsoft 89
Middle East 36
- Egypt 9, 70
- Israel 33
- Qatar 32
Millicom International Cellular 37
- Tigo Ghana 73
Morgan Stanley 17
MTN 25, 28, 38, 72, 83, 84
- Ghana (Scancom) 72
- South Africa 83, 84

N

Naspers Limited (MIH Group)
- MultiChoice 87
-- DStv 87
Netflix Inc. 55, 64, 73
Nike Inc. 38
Nokia 25, 27, 42, 44, 58
NTT 25, 27

O

Oger Telecom
- Cell C 83, 84
OnMobile Global Ltd 63, 92
Oracle 36
Orange 35
- Orange 27, 28, 34, 35, 36, 45, 49, 53, 64
- Spain 49, 64
- UK (see EE) 35, 36, 42, 53
OTE (Hellenic Telecom. Org. SA, see DT)
- Cosmote 55
Greece 55

P

Phluido 23, 28
ProSiebenSat.1 Media AG 53
Proximus Group 32

S

Safaricom 35, 36, 38, 73, 85, 86, 87, 93
- M-PESA 36, 85
Samsung 42, 62, 89
SAP 30
Singapore Telecom
- Optus (Australia) 38
Sistema
- Mobile TeleSystems 32
SK Telecom 25, 28
Sky Network Television 38, 76, 79
SoftBank Corp. 32
Sony Corp. 62, 64
- Sony Pictures Entertainment Inc. 64
-- AXN 64
Sprint Nextel 91
Supreme Court 64, 75

T

TalkTalk Telecom Group plc 38
TCL Communication 40
Technology
- 2G 23, 73, 83, 89
-- GSM 33, 51
- 3G 23, 73, 83, 89
-- Evolved HSPA (HSPA+/I-HSPA)
-- MIMO 58, 62
- 4G 9, 23, 26, 27, 72, 83, 88, 89, 93
-- Long Term Evolution (LTE) 9, 27, 58, 62, 79, 89
-- VoLTE (Voice-over-LTE) 89
- 5G 19, 27, 28, 33, 41, 42, 44, 50, 51, 52, 58, 62, 82, 91, 92
- AI 25, 33, 53, 55, 58, 78, 80, 81
- Cloud computing 24, 26, 37, 64, 78, 89
- CWDM 28
- Ethernet 28, 82
- Femtocell 9
- Fibre 20, 37, 42, 49, 55, 56, 59, 64, 65, 66, 70, 74, 92, 93
- FTTP 20, 66
- FTTH 55, 59
- IoT 20, 29, 30, 33, 37, 38, 39, 45, 58, 64, 75, 78, 79, 82, 93
- IP 21, 24
- M2M 29, 30, 33
- MMS 9
- Narrow Band Internet of Things (NB-IoT) 79
- RAN 21, 22, 23, 24, 25, 26, 28, 91
- RBT 63
- R&D 24, 41, 42, 43
- SIM 29, 67, 71, 75, 81
- Smartphone 67
- SMS 53
- Spectrum 14, 19, 50, 51, 72, 82, 88, 92, 93
-- 800 MHz 72, 88
-- 900 MHz 73, 88
-- 1800 MHz 73, 88
-- 2100 MHz 73, 88
-- 2600 MHz 88
- WAN 84
- Web Services 35
- W-LAN 33, 89
Technoport SA 45
Tele2 61, 62, 92
- Netherlands 61, 92
Telecom Argentina 30, 32
Telecom Infra Project 21, 25, 91
Telecom Italia 18, 19, 20, 25, 28, 55, 91
- Telecom Italia Mobile 28, 30, 55
Telefónica Group 16, 18, 22, 23, 24, 25, 26, 27, 28, 37, 38, 45, 49, 52, 55, 64, 89
- Europe 38
- España 49, 64
- Ireland 18
- UK 16, 55
Telekom Austria Group 53
- Austria
- A1 53
Telenet 61
Telenor ASA 35
TeliaSonera 53
Telkom South Africa 83, 84
Telstra 28, 53, 78, 93
Time Warner
- CNN 93
Tinizine Ltd
- Azoomee 45
TomTom 33
Truphone 36
Tunisie Telecom 32
Twenty-First Century Fox 66
- Sky
-- Sky Italia 55

U

United Internet 52
UPC 37

V

Vasona Networks 45
Viettel Group
- Movitel 88, 93
Visa 38
Vocus Communications 77
Vodacom Group 9, 10, 37, 38, 69, 70, 71, 83, 84, 86, 88, 89, 93
- Ex-executives
-- Maseko, Sipho 84
- Group 9, 10, 37, 38, 70, 71, 83, 84, 89, 93
- Lesotho 38
- Mozambique 88, 89, 93
- South Africa 9, 38, 70, 83, 84, 89, 93
- Tanzania 38, 86
- Vodacom Business 84, 89
Vodafone
- Africa, Middle East, and Asia Pacific Region (AMAP) 8, 10, 12, 17, 36, 38, 68, 69, 71, 93
-- Africa 17, 32, 35, 36, 38, 68, 69, 84, 85, 93
-- Asia 32, 35, 36
-- Australia 41, 42, 44, 71, 78
--- VHA Pty. Ltd (see Hutchison Whampoa) 71
-- Egypt 9, 70, 71
-- Ghana 32, 35, 71, 72, 73, 93
-- India 6, 18, 22, 25, 28, 35, 36, 63, 69, 70, 71, 74, 75, 93
--- Indus Towers 74
-- Kenya (see Safaricom) 35, 36, 38, 73, 85, 86, 87, 93
-- Middle East 36
-- Mozambique 88, 93
-- New Zealand 38, 41, 44, 71, 76, 77, 78, 79, 80, 82, 93
--- TelstraClear 77
-- Pacific 32, 36
-- Qatar (see Vodafone and Qatar Foundation and Vodafone Qatar) 32, 71
-- South Africa (see Vodacom) 9, 10, 37, 38, 69, 70, 71, 83, 84, 86, 88, 89, 93
-- Turkey 9, 17, 22, 28, 40, 42, 69, 70, 71, 91
- Board of Directors
-- Davis, Sir Crispin 35
-- Dopfner, Dr. Mathias 34
-- Furse, Dame Clara 35
-- Jonah, Samuel Esson 35
-- Kleisterlee, Gerard 35
-- Kordestani, Omid 35
-- Moraleda, Amparo 35
-- Nish, David 35
- Europe Region 9, 10, 12, 46, 47, 48, 49, 71, 92
-- Cable & Wireless Worldwide 65
-- Czech Republic 37, 80
-- Germany 6, 8, 9, 10, 17, 34, 37, 40, 44, 47, 48, 49, 50, 51, 52, 53, 55, 66, 80, 89, 91, 92
--- KDG Holding GmbH (Kabel Deutschland) 38
-- Greece 9, 17, 38, 48, 54, 55, 92
-- Hellas On Line (HOL) 54
-- Ireland 17, 18, 33, 36, 37, 38, 40, 48, 55, 56, 57, 66, 92
--- Netshare Ireland 18
--- SIRO 37, 56, 57, 92
-- Italy 6, 7, 9, 11, 12, 14, 16, 17, 19, 20, 35, 37, 40, 48, 49, 55, 58, 64, 66, 80, 91, 92
-- Malta 59, 92
-- Netherlands 17, 60, 62, 92
--- VodafoneZiggo 17, 38, 60, 62, 89, 92
-- Portugal 9, 17, 37, 40, 48
-- Romania 9, 37, 38, 48
-- Spain 6, 7, 9, 11, 13, 14, 17, 28, 35, 36, 37, 38, 40, 42, 48, 49, 55, 63, 64, 66, 92
--- Grupo Corporativo Ono (ONO) 37, 38
-- UK 8, 9, 11, 14, 16, 17, 27, 35, 36, 37, 38, 40, 41, 42, 43, 44, 48, 49, 53, 55, 65, 66, 67, 80, 81, 89, 91, 92, 93
--- Cornerstone Telecommunications Infrastructure Ltd 16, 17
--- Talkmobile 67
- Executives
-- Atkinson, Sean 37, 57
-- Beal, Matthew 26
-- Cavaleri, Barbara 37
-- Coimbra, António 37
-- Colao, Vittorio 7, 33, 35, 39
-- Della Valle, Margherita 6, 18, 48, 69
-- Essam, Ahmed 7
-- Fouladi, Babak 38
-- Jeffery, Nick 16, 49
-- Joosub, Shameel 37
-- Liebenberg, Deon 38
-- Lundal, Morten 35
-- Mundy, Jeni 38
-- Odenhoven, Harry 36
-- Paris, Jason 76, 93
-- Read, Nick 6, 16, 20, 39, 41, 47, 65, 71, 76
-- Roman, Francisco 37
-- Schellekens, Ronald 36
-- Sharma, Balesh 36
-- Sood, Sunil 36
-- Stanners, Russell 76
-- Tenorio, Santiago 22
-- Timuray, Serpil 17
-- Wibergh, Johan 13
-- Williams, Matt 38
- Ex-executives
-- Combes, Michel 35
-- Frazao, Rui 45
-- Humm, Philipp 35
-- Jordan, Phil 38
-- Lapusneanu, Alina 89
-- Ryan, Paul 38
- Group 8, 20, 33, 36, 79, 91, 92, 93
-- Partner Markets 29, 30, 31, 32, 53
--- Africa (Afrimax) 32
--- Austria (A1/Telekom Austria) 53
--- Belgium (Proximus) 32, 61
--- Brazil (Grupo Datora Telecom/Vodafone Brasil) 29, 30, 32, 91
--- Chile (Entel PCS) 30
--- Iceland (Vodafone Iceland) 53
--- Kenya (Safaricom) 35, 36, 38, 73, 85, 86, 87, 93
--- Malaysia (Celcom) 38
--- Russia and CIS (MTS) 32
- Vodafone Carrier Services 20, 30
- Vodafone Global Enterprise (VGE) 20, 36
- Vodafone Procurement Company (VPC) 18, 45
--- Tomorrow Street 45
- Vodafone Ventures
--- Vasona Networks (see separate) 45
- Products
--- Business 20, 29
--- Europe 17, 48
--- GigaTV 53, 92
--- Liberty (Malta) 6, 10, 11, 37, 49, 61, 62, 66, 92
--- Mobile Broadband 42
--- One 64
--- Red 36
- Terminals
--- 340 9
- V by Vodafone 39, 40
- Vodafone Cloud 20
- Vodafone Digital Marketplace 89
- Vodafone TV 49, 55, 64, 79
Vodafone Iceland 53
Vodafone Qatar Q.S.C. 32, 71
Volkswagen 33

W

Walt Disney Company, The 64, 66

Z

Zain (MTC) 32
ZTE Corp. 30, 43, 44

  • Further rollback of Cornerstone could free room for UK asset hive-off.
  • Italy emerges as potential centre of tower restructuring.
  • Shareholder pressure evident in move.

The Group indicated its pending “virtual TowerCo” could indeed absorb and affect Vodafone UK’s (VfUK) Cornerstone Telecommunications Infrastructure joint venture (JV) with Telefónica UK, despite earlier suggestions to the contrary.

Vodafone’s results presentation for the quarter ended 30 September 2018 offered up a little more background on the savings-focused plan, first flagged by new Group Chief Executive (CEO) Nick Read in September 2018 (Vodafonewatch, #168). The accompanying slides contained a map covering the near-80,000 tower assets that make up the Group’s network across Europe, and included those controlled by Cornerstone.

Further, the Group is now conducting a six-month due diligence process on legal, financial, and operational considerations surrounding the spinout of towers assets – “including those held in JVs”, said Read. Nick Jeffery, CEO of VfUK – which is the current parent of Cornerstone – had earlier denied the move would impact the venture, telling Reuters the UK could be taken out of Read’s “discussion” about plans to sell some of Vodafone’s network assets.

Cornerstone getting less radio active

The Group’s broader push to sweat Vodafone’s European infrastructure assets may have other implications for Cornerstone, too.

Speaking at Morgan Stanley’s mid-November 2018 Tech, Media & Telecom investor conference in Barcelona, Read intimated there may be further rollback of the UK JV, following evident difficulties harmonising network design with its rival-cum-partner.

The two operators brought cooperation to an end in London during 2017 (Vodafonewatch, #156 and #166), and Read indicated that they “may unwind a little bit more in the UK in some of the big cities”. “We’ve learnt passive-sharing is fine, it’s a good thing to do. Active-sharing gets more complex”, he added.

This seems to leave open the hypothetical possibility of rollback of Cornerstone in cities and spinout of towers in those areas to the new TowerCo.

Vodafone – late to the party once more

The result of a summer of reflection by Read on Vodafone’s challenges and direction, as well as oversight of tower restructuring in India, the TowerCo forms part of the new CEO’s plan to accelerate extraction of operational efficiencies across Group functions and OpCos, and ease cash flow constraints.

Having previously been against a tower rejig, because of negative impact on competitive differentiation and financing costs, Read now sees a strategic partnership with a tower specialist or private equity group as attractive, saying prospective allies are more open to accepting only a non-controlling interest in infrastructure vehicles. This would enable Vodafone to retain strategic control over network decision-making, while benefiting from sale proceeds, savings, and any uplift in towers’ tenancy ratios.

Vodafone’s future course has yet to be firmed up. A due diligence process is expected to run until around the turn of the fiscal year (March 2019-April 2019), and the plan remains subject to the Group’s ability to find the right partner (and manage the relationship risks thereafter).

This is also not an original plan – even in Europe, where operators have been slower to offload infrastructure than in other regions. Deutsche Telekom, Telecom Italia (TI), and Telefónica are among the operators that have already made moves to spinout tower assets and could feasibly compete with Vodafone to skim off the cream of prospective allies. Operators might well partition “strategic” towers from any deal, further reducing the appeal to potential Group partners.

It is not yet clear which Group department will be in charge of the TowerCo, but a direct report to either Read or Chief Financial Officer Margherita Della Valle seems pretty inevitable, considering the duo’s evident shared enthusiasm for centrally-controlled, top-down savings programmes, and with inspiration for the new business being drawn from Group Finance’s flagship Vodafone Procurement Company venture.

Ireland primed

Ireland is one market where a strategic partnership on towers would appear to have fewer roadblocks, and could hypothetically fit well as a testing ground if the Group opts for a cautious, step-by-step rollout.

Vodafone Ireland (VfIr) has already effectively conducted a tower outsourcing move, having in 2012 established a new business with rival Three Ireland, to manage the two operators’ assets. The JV – named Netshare Ireland – was short-lived, with Three exiting the business in 2014, after announcing a revamped network-sharing relationship with incumbent Eircom in the wake of its takeover of Telefónica Ireland (Vodafonewatch, #127).

Subequently, VfIr has continued to run the business as sole owner, while melding it more closely into its organisational structure. A VfIr spokesperson told Vodafonewatch that Netshare is “now a fully integrated part of Vodafone Ireland” and the business’ brand is no longer in common use within VfIr.

Tie-up may have an Italian 5G flavour

While there are numerous external candidates for a tie-up with Vodafone, Read’s comments came shortly after Andrea Balzarini, Head of Administration, Finance & Control, & Business Support at Infrastrutture Wireless Italiane (INWIT) – the tower arm of TI – indicated the business was “very interested” in Vodafone’s infrastructure review. “The Vodafone towers are really more and more interesting”, he said, while noting the move towards tower consolidation in Europe.

One immediate driver for tower consolidation in Italy is divvying up the cost of 5G rollout. Both Vodafone and TI spent heavily in the recent auction of 5G-friendly frequencies – laying out around EUR2.4bn (£2.1bn) each (Vodafonewatch, #169) – and a report by Bloomberg, citing unnamed sources (who were apparently breaking a non-disclosure agreement), said talks were underway between the two providers to strike a 5G tower-sharing agreement of some sort. A deal could reportedly be signed off during the quarter to 31 March 2019.

If the Bloomberg report is correct, Vodafone Italy (VfIt) and TI are contemplating an ‘active’ network-sharing agreement; not just the sharing of passive tower infrastructure, but also radio equipment and spectrum. Given Read’s reservations about active network-sharing arrangements, and how they can hamper rollout strategy if partners’ objectives are not fully aligned, the Bloomberg reports suggests he might be prepared to overlook potential problems to achieve greater cost savings. While active arrangements are riskier than passive ones, they offer more in the way of cost reduction.

Reports of a 5G tie-up come at a fraught time for both Vodafone and TI. Aside from the heavy outlay on 5G spectrum, VfIt has seen a sharp decline in service revenue following the market entry of France based Iliad Group, and resultant uptick in price competition (Vodafonewatch, #167 and passim).

A more conspiratorial-minded observer might see the supposed plan as having the fingerprints of common shareholders in the two Groups, or at least as reflecting their current vulnerability to City agitation. Notoriously troublesome shareholder Elliot Management Corporation, which was recently reported to have bought into Vodafone (Vodafonewatch, #167), has also recently been billed as behind the dramatic ousting of Amos Genish from his role as TI CEO, in what Genish later called a “coup”. While Elliot was keen to sell TI’s landline assets, Genish wanted to hold onto them. The former CEO said it was short-sighted to perform an offload, given the fixed-line requirements to support 5G. The new TI CEO, Luigi Gubitosi, is backed by Elliott.

Broadband network consolidation in the offing?

Network consolidation remains high on the agenda of Italy’s coalition government – whether in mobile or wireline. Media reports say Rome is pushing ahead with the idea of a single broadband infrastructure company, combining the landline networks of TI and Open Fiber, the Enel-controlled fibre venture with which VfIt has a “strategic relationship”. With Genish no longer at TI, the momentum behind such a move might well increase, although the threat of job losses, and how the respective network assets of the two operators might be valued, makes it a hot political potato.

How such a merger will affect Vodafone’s relationship with Open Fiber is another unknown. VfIt has a long-term relationship with Open Fiber, in place until 2031, and has been an enthusiastic backer of the venture, seeing it as an opportunity to significantly reduce reliance on more expensive TI wholesale access and restrict its own capital expenditure on fibre-to-the-premise (FTTP). VfIt uses Open Fiber capacity to extend the reach of its flagship IperFibra FTTP offering, launched in 2016 (Vodafonewatch, #155), and fuel growth in its wireline business.

For more on this story, including a table outlining Vodafone’s Europe Region tower assets, see the full December release of Vodafonewatch.

Image: VodafoneZiggo/Flickr

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