Vodafone chief seeks media partners to tackle slowdown
Vodafone's U.S. venture Verizon Wireless struck a deal this year to sell mobile-phone packages bundled with fixed-line, TV and Web offerings of cable operator Comcast Corp. (CMCSA) in each other's stores. Vittorio Colao, Vodafone's chief executive officer, wants to bring that kind of partnership to Europe, even if that means he'll have to sign separate agreements in a dozen markets on the culturally and politically fragmented continent.
"Can I have the equivalent of a Comcast-Verizon relationship in Europe?" Colao said over coffee at his company's London offices in September. "Probably, but there will be lots of these types of relationships." The push to find new European customers is of paramount importance for the 51-year-old as Vodafone generates more than twothirds of revenue in a region that's struggling with high sovereign debt and slow economic growth. Europe may have caused Vodafone's service revenue to contract 0.7 percent in the fiscal second quarter that ended in September, according to data compiled by Bloomberg.
That would be the first decline in 10 quarters for the Newbury, England-based company, which is scheduled to report earnings tomorrow. The figure includes sales from voice, data, messaging and broadband services, and excludes the impact of currency swings and merger and acquisitions.
Vodafone's African business, Vodacom Group Ltd. (VOD), said today its first-half profit rose 22 percent as the company expanded beyond South Africa.
Shares of Vodafone climbed 0.2 percent to 167.95 pence in London trading at 8:32 a.m. The shares have lost 6.3 percent this year through Nov. 9, compared with a 9.8 percent decline by the 23-company Bloomberg Europe Telecommunication Services Index.
The world's second-largest mobile-phone company, trailing China Mobile Ltd. (941) in revenue, reported a 1.1 percent decline in organic service revenue for Europe in the year through March 2012, while sales grew 8 percent in Asia, Africa and the Middle East and 7.3 percent at Verizon Wireless, in which Vodafone owns 45 percent.
The agreement with Comcast allows Verizon to offer customers Internet access across the U.S. without having to expand its own fiberbased service, which cost the company $23 billion over seven years to build. While Verizon sells its own TV and high-speed Internet services in some regions of the U.S., there's only a 15 percent overlap with the territory of Comcast, the country's biggest cable company. The deal has turned a potential adversary of Vodafone into a partner across the U.S. and a replication in Europe would make sense, says Robin Bienenstock, an analyst at Sanford C Bernstein in London.
Phone and broadband companies could benefit from distribution agreements with media companies as customers increasingly demand access to their favorite magazines, movies and television shows on mobile devices.
Vodafone is in talks to replicate a content deal it has in Italy -- where it distributes the La Repubblica newspaper on a mobile platform -- in the U.K. market, Colao said.
France Telecom SA (FTE) partnered with each of the local units of RTL Group SA, Europe's biggest broadcaster with 47 channels in nine countries, in order to win the rights to distribute the Groupe M6 TV channel in France and three other channels in Belgium.
"People in Germany want to see the German version of the Idol series, not the U.K. one," said Oliver Fahlbusch, a spokesman for RTL, whose FremantleMedia content-production arm has produced hit shows such as "The X Factor" and "Good Times, Bad Times."
BT Group Plc this year acquired rights for top-flight English soccer and rugby matches, which were traditionally the preserve of pay-TV operators, and is building its own television channel to sell more broadband subscriptions. Purchasing content is a risky step for phone companies as they don't have experience in running media businesses, said IHS Screen Digest analyst Tim Westcott.