The future is in the air. With its acquisition of Mannesmann AG, Vodafone Airtouch has not only become the world's biggest wireless operator, but has thrown down the gauntlet to AOL/Time Warner in the coming wireless Internet services contest.
The deal still requires approval from the EU competition commission, which is likely to insist on the sale or spin-off of Orange, the UK mobile phone provider, with an announcement due 17 February. But that won't impact too much on the bigger picture: the creation of a world player set to capitalise on the idea of Europe's route to ecommerce being 'Internet-via-the-mobile'.
Chris Gent, Vodafone's dogged chief executive, has invested three months in making the deal palatable to Mannesmann's shareholders. His determination was spurred by a clear vision of mobile commerce's potential but an uncertainty of where the revenue would be directed. In the same way that AOL/Time Warner and MCI Worldcom/Sprint (respectively, the second and third largest mergers ever) have created massive mergers between infrastructure, content and software, so Vodafone has hedged its bets by covering all the bases.
Vodafone has a fighting chance - through size alone. The £105 billion ($181 billion) deal consolidates four of Europe's biggest mobile players: Omnitel in Italy, SFR in France, Mannesmann in Germany and Vodafone in the UK. These companies have a combined customer base of 42 million and a market capitalisation of £228 billion, making the new conglomeration the fourth largest company of any type in the world.
More importantly, the Vodafone/Mannesmann link is just the next step in Vodafone's plan to grab an early lead in the wireless Internet market. While traditional fixed-line operators such as BT expect revenue gains of five per cent over the next five years, their wireless competitors anticipate at least 20 per cent. This is partly due to increased wireless voice traffic, but is more to do with the anticipated dominance of Internet-enabled smartphones.
"The alliance shows a clear commitment to wireless data provision," says Alfredo Biocca, senior analyst with the Meta Group.
Europe's largest wireless network
By merging with Mannesmann, Vodafone has guaranteed itself Europe's largest wireless network. The company is now working to secure exclusive content to deliver to customers over that infrastructure. It has already negotiated a deal with the BBC to feed live news to mobile phones, while its current subsidiary Orange has signed ITN and the Press Association. Mannesmann is expected to sell off Orange after the merger.
The government opened bidding for the third generation of network licences on 12 January. They will be granted in the next few months, with the networks themselves expected within three years. These faster wireless networks will offer features such as videoconferencing and streaming audio, with mobile phones transformed into multimedia handsets offering Internet access, news and financial services. Vodafone wants in on this market.
It is also working to establish proprietary wireless Internet services as part of its alliance with French communications company Vivendi - itself in negotiations with AOL Europe - while Mannesmann has been angling for a 50 per cent stake in the online services of German multimedia firm Bertelsmann AG. This would give Vodafone the ability to combine an extended network with ecommerce content and services channels.
"The real benefit of the Vodafone/Mannesmann deal is that it helps it compete with Time Warner/AOL," says Biocca. "All the telcos are trying to find the right partners for infrastructure and content, but Vodafone made the step first."
Big deals with suppliers
The Vodafone/Mannesmann/Vivendi behemoth will have the clout to make powerful deals with its suppliers, according to analysts. "They will be able to get better procurement deals from Ericsson and Nokia," predicts Tim Sheedy, research analyst with IDC. "Some of this will hit the bottom line as profit, and some will be passed on to customers in terms of better services, such as in the wireless application protocol (Wap) and wireless Internet arena."
Such changes will take time. But it may soon be cheaper for consumers to make phone calls outside their domestic market since the network will be owned by just one company.
Analysts see the biggest effect as being on the traditional carriers. Keen not to lose the lucrative wireless market, they will begin making alliances of their own to compete with the Vodafone/Mannesmann giant. BT, for example, held exploratory talks with Spain's Telefonica late last year, and these are likely to be revived in light of last week's developments.
Like AOL/Time Warner, once the champagne stops fizzing, hard questions will start to be asked. But the telecom and Internet landscape has changed - yet again.
Meteor showers as a service will be visible for about 100 kilometres in all directions
Saturn's rings only formed in the past 100 million years, suggests analysis of Cassini space probe data
New findings contradict conventional belief that Saturn's rings were formed along with the planet about 4.5 billion years ago
Such an earthquake would lead to a complete stress release in this segment of the fault system
Four types of test were performed to assess the performance of parachutes that could be used in missions to Mars