Nick Read said in a Sunday Times interview that he’d consider buying Three UK, the country’s smallest mobile operator.
Nick Read stepped up to the Group CEO role from Group CFO in 2018. Since then, the share prices has fallen by 24%, although this is largely due to factors way beyond his control.
They include:
• lost roaming revenues due to Covid lockdowns
• huge debts accrued from his predecessor, Vittorio Colao, buying cable assets in the Czech Republic, Germany, Hungary and Romania from Liberty Global for €18.4 billion which added to the debt pile which stood at €27 billion at 31 March 2019
• multi-billion euro shenanigans in the Indian market where, from Vodafone’s point of view, the regulatory and legal goal posts have proved highly unpredictable and newcomer Jio destablised the market
• huge investments in spectrum and 5G infrastructure, and fibre, and
• it will cost billions to strip Huawei kit out of the UK’s infrastructure to comply with the legal requirement to do so.
Duplicating infra is daft
Read also points on that returns on capital for telcos in Europe has halved over the last 10 years, and this is exacerbated by competitors duplicating infrastructure, because as the Danish Strand Consult has often pointed out, the European Union’s telecoms policy is primarily concerned with giving users’ choice, high speed connections and the best possible prices due to competition to the detriment of much else.
This has led to the situation, as Read pointed out, that markets as big as the US, China and India have three major mobile operators whereas there are more than 100 in Europe, making for a fragmented patchwork that, by definition, lacks the economies of scale.
Close collaboration
Like other group CxOs (see our exclusive interview with Telefonica’s Group CTIO, Enrique Blanco and Orange Business Services’ Group CTO, Philippe Ensarguet, for example) Read extolled the virtues of telcos working together in the Sunday Times interview (subscription needed).
And they are. For instance, Vodafone Group, Deutsche Telekom, Orange, Telefonica and TIM signed an MoU to promote their commitment to Open RAN early in the year, followed by publishing their technical requirements for it.
Read has struck collaboration deals across many Vodafone’s markets: in the UK, last week Vodafone extended its deal with alternative fibre network provider, CityFibre, and it also has wholesale deal with BT’s access arm Openreach.
He suggested Vodafone could co-invest in rival Virgin Media’s roll out of fibre and even merge with its smallest UK competitor, Three, although a merger between Three UK and O2 UK (which is owned by Telefonica and merged with Virgin Media earlier this year) was blocked by the EU Competition Commission in 2016.
However, that decision was overruled, rendered null and severely criticised in May 2020 by the General Court of the European Court of Justice for being based on principles rather than facts, after Hutchison, Three UK”s owner appealed the decision. It maybe the European Competition Commission will recognise that consolidation in the European market is not only desirable but inevitable.