back to article Shades of Mannesmann: Vodafone should buy T-Mobile US

When Deutsche Telekom bought One 2 One on the 6th August 1999 I sat in the press conference at the Dorchester hotel and heard the company say “We are the Germans. Today Europe, tomorrow the world”. The boss also reprimanded a journalist for switching off a ringing phone. “Answer it, where do you think our money comes from?” …

Silver badge

Outlook: fine

> Vodafone took what it had left of that $130bn and bought T-Mobile US

The US market is probably the worst, most restrictive and most predatory in the world. Their regulators seem to consider any foreign enterprise as being fair game. Yet their idea of "fair" is to hold a meeting, lock the doors and then threaten the senior executives with jail unless billions in protection money fines are paid. With neither negotiation nor a trial to establish the legality, transparency or fairness of the punishment - or even if they were to blame for any regulatory transgressions.

So if Vodafone was to wander, innocently, into the american market with a wad of $130Bn bulging out of its back pocket, nobody should be surprised if the american government sees it coming and mugs them for it. After all: it's a quick "steal", costs their citizens nothing and is much more popular than trying to raise revenue through taxing the population.

4
0
Silver badge
FAIL

Re: Outlook: fine

What do you base this bizarre ramble on? the America regulators are equal opportunity finers - just look at the record fines handed out to American banks.

The FCC have shown themselves to be far less predatory that some of the others.

don't get me wrong I think a US adventure would be a mistake - Voda needs to fix its network under-investment in Europe - but its in the US interests to keep another player alive in the mobile space.

0
0
Silver badge
Paris Hilton

Re: Outlook: fine

record fines handed out to American banks

Names?

1
0

Re: Outlook: fine

Vodafone leaving the money it made from Verizon in the US might have significant benefits in the eyes of the regulators.

The alternative is that they spend it with Scandinavian and Asian companies on infrastructure for other parts of the world.

0
0
Bub

Re: Outlook: fine

http://time.com/3153262/bank-of-america-record-16-billion-fine-mortgages-subprime-loans/

0
0
Silver badge

Re: Outlook: fine

> the America regulators are equal opportunity finers - just look at the record fines handed out to American banks

Never said they weren't - just like muggers will prey on tourists and locals alike. The difference being that locals usually know what areas to avoid and recognise the signs of someone intent on "getting a tip" from a passer-by.

But when you're fining a company (or as it always comes down to: its shareholders) amounts in the $ billions in return for letting the senior officers - the people who must have known and approved if not actually taken part in the wrongdoing - walk. or get token punishments, shows a corruption in the justice system that has gone way too far.

By that point it has long ceased to be a law-enforcement operation, as there is never any judiciary involved - just a demand for a pre-determined amount of money and is merely extortion.

0
0
Gold badge

Why the regulatory problems?

Surely forced/agreed sales are a standard part of US monopolies regulation, as they are in the UK and Europe? You buy a comnpany that gives you a massive monopoly in one sector, as part of getting regulatory approval you agree to sell the bit that's causing the problem. Problem solved, takeover goes through. In the case of T-Mobile / Orange becoming EE, it was radio spectrum they had to sell, this isn't anything out of the ordinary.

0
0
Silver badge

Slightly confused history

T-Mobile's purchase of One2One (and another networks in other countries) was fuelled by the privatisation and IPO of Deutsche Telekom, along with the general goldrush of telecoms and internet companies at the turn of the millennium. Telekom's Ron Sommer was just as odious as Vodafone's Chris Gent.

It was also Mannesmann's purchase of Orange that spurred Vodafone to take it over (at ruinous expense to Vodafone's shareholders but at great profit to Mannesmann's shareholders like Deutsche Bank and Hutchison Whampoa who saw a 400 % return within a year). Mannesmann also came with dowry of a part of AirTouch making the sale of Verizon over ten years later less impressive than portrayed in the article.

One has to question the value of buying into the US market at the moment. Money-printing has inflated shareprices and profits seem to have reached their maximum. The market is much less competitive than anywhere else which suggests that margins, and thus profits, will decline. Furthermore, T-Mobile needs a lot of money spending on building out the infrastructure in order to compete with AT&T, Verizon and Softbank.

T-Mobile meanwhile is doing a reasonable job on its own of raising its profile and growing its customer base. Being number 3 does make it a possible target but I suspect the price will still be too much for many. Make take a real outsider such as say Google or China Mobile with pockets deep enough to pay for the infrastructure and keen on disrupting the status quo.

0
0

Re: Slightly confused history

Lots of points, some of which I agree with, some of which I don't.

Yes, the IPO of Deutsche Telekom led to an acquisition spree, and yes the people who benefited most from the pass-the-parcel with Orange were the original shareholders - principally Hutchinson. But the reason the price was so high was that Mannesmann bought Orange not as commercial enterprise but as a poison pill. Vodafone would have bought Mannesmann anyway as it was on a (European) expansion drive. They did all kinds of things to hype the Voda share price which they including talking bollocks about near term value of mobile data.

I take your point on the dowry, but even so Airtouch was a good deal financially if not in terms of "The sun never setting on the Vodafone empire".

But the main thing you are missing is that DT is comitted to selling T-Mobile US.

Simon

0
0
Silver badge

Re: Slightly confused history

As I remember it the Orange deal caught most people unaware and pushed Vodafone to react because Mannesmann was suddenly a competitor in the home market, where Vodafone was ironically weakest. It was highly leveraged which left Mannesmann vulnerable but it was a great brand and Mannesmann had the better strategy (integration of fixed line, mobile and internet) that Vodafone rediscovered a few years ago but only after burning through the goodwill. Without the deal I'm not sure if Vodafone would have been able to offer such an eye-watering premium to the institutional shareholders who decided to sell: apart from Airtel's investments it had virtually no experience outside the UK or in integrated services.

But the main thing you are missing is that DT is committed to selling T-Mobile US

Telekom has expressed interest in selling, yes. It has also set a floor on the price. Whether it would be interested in selling, to what it continues to consider as a direct competitor, I'm not so sure.

Otherwise I think the guys in Bonn are probably quite happy with hot T-Mobile US is doing at the moment. Let's face it: there is plenty of fat to cut away in the US market and further consolidation should not be ruled out, especially if the FCC ever discovers the concepts of unbundling and number portability.

0
0
Anonymous Coward

"And of course he was right. Vodafone bought Airtouch for $62bn in 1999 and sold its share for $130bn in 2014. During that time it had seen amazing growth."

I disagree with the above and that Airtouch was a bad buy. First, Airtouch had foreign assets as well. That is what really attracted Vodafone. Some of these foreign assets, Vodafone already owned a portion anyway; now they just owned more of it. They also had to divest some properties as in some cases, they owned a share on a competing provider.

As for the above, yes they paid that much and sold it for that much, but when they took the US assets and combined them with Verizon to form Verizon Wireless, the foreign assets of Airtouch stayed with Vodafone. So, they got much more than $68 billion in the process.

0
0

..but what about fixed?

I've also daydreamed about this possibility but it's seems pretty unlikely as Vodafone management are really fixated on combining fixed & mobile telecoms in developed markets and that just wouldn't be possible in the US

0
0

Which strategy to pursue?

I've been thinking for several months that Vodafone should try and acquire T-Mobile in the USA. However, I do not think it will be an easy acquisition. First of all as stated above by Charlie Clark would Telekom sell to a European rival? I think if Vodafone paid a large enough fee then Telekom would but there would probably have to be an asset swap.

Let me suggest this: Vodafone recently acquired Kabel Deutschland for €7.7 billion. Telkom could tell Vodafone we want ownership of Kabel Deutschland as part of the T-Mobile USA sale.

Vodafone if its playing the long game should agree to this. Vodafone acquiring T-Mobile USA would mean there could be no takeover by AT&T and therefore Vodafone would remain safe. Given the huge profitability in the U.S. mobile sector (see Verizon) and the Federal Government's decision to block M&A activity to keep four nationwide mobile network providers (Verizon, AT&T, Sprint and T-Mobile) there is regulatory encouragement for Sprint and T-Mobile to continue to grow and re-balance the mobile landscape from the dominance of Verizon and AT&T.

Vodafone can use its brand to become a truly global mobile network and establish itself in the USA.

This would allow Liberty Global to continue buying up European assets in the cable industry and then sometime within the next few years to next decade Liberty Global (a John Malone company) and Vodafone merge which makes complete sense given their various synergies. The sale of Kabel Deutschland to Telkom would mean there would be no regulatory issues in Germany from a Vodafone/Liberty being too dominant.

Vodafone would become far stronger in Europe and the U.S.A after these deals.

Then in the longer term once Vodafone becomes established in the USA Vodafone acquires Charter Communications (another John Malone cable company) which creates more synergies and quad play opportunities.

Will some of these deals happen - yes, most probably.

Will all of these deals happen - no but I believe they should and would be beneficial to all the companies involved.

0
0

COMPLETELY AGREE

Currently I am a T-Mobile USA customer. I have ALWAYS been a fan of Vodafone, I love the name, logo, their presence as a carrier in multiple countries.... I hated that they were only ever displayed on Verizon phone's "global SIM card" as a small logo next to the big Verizon check mark. T-Mobile has grown quite substantially over the past year, however I think to become a truly considered and respected company, they need a more respected brand backing them. T-Mobile is doing well, however they are still laughed at when people say "I have T-Mobile." I would love my iPhone to display "vodafone US" instead of "T-Mobile," and I would love to see the T-Mobile logo and stores all replaced with the big Vodafone red rain drop. The USA would be a great place for re-enter, this time with a full brand presence. This would be a great opportunity for Vodafone to offer enhanced roaming plans from Europe to America as well! I truly hope something like this happens, I honestly can't describe how happy I'd be to finally be able to purchase Vodafone in my home country.

0
0

POST COMMENT House rules

Not a member of The Register? Create a new account here.

  • Enter your comment

  • Add an icon

Anonymous cowards cannot choose their icon

Forums

Biting the hand that feeds IT © 1998–2018