Rumors are circulating of a rift between Verizon Wireless’ joint owners.
Verizon Wireless, the US’ largest mobile operator, last week agreed with Lucent to build a 2.5G network based on Qualcomm’s CDMA2000 standard. Since then, a major difference of opinion has been rumored between 55% shareholder Verizon and 45% shareholder Vodafone over 3G standards.
Vodafone operates several mobile phone networks, all of which use the GSM standard, so its customers can use their existing phones on Vodafone-owned networks almost wherever they go. That way, the company can make the most of its global coverage. The easiest way to upgrade a GSM network to 3G is using a standard called wCDMA.
But in the US, Verizon Wireless uses a completely different standard for its existing network, CDMA. This means that Vodafone’s GSM phones are incompatible with Verizon’s network. Vodafone wants Verizon Wireless to upgrade from CDMA to wCDMA when it moves up to 3G, so Vodafone subscribers can use their phones in the US as well. This will be particularly useful for business customers, who already bring in higher revenues than personal customers and are less likely to change networks.
The problem is that, given the CDMA2000 2.5G decision last week, the obvious way for Verizon to go to 3G from a technological point of view is to implement full CDMA2000. However, Verizon this week insisted it has not yet decided a 3G standard, saying committing this far in advance would be asking for trouble.
It’s hard to tell what Verizon Wireless will actually do. Vodafone will benefit from wCDMA roaming. However, Verizon’s CDMA2000 2.5G network will make that standard a cheaper upgrade path. There’s a clear conflict between the two shareholders’ interests.
How will it end? When Vodafone has had its way obstructed as a minority shareholder in the past, it has tended to take control. Acquiring the whole of Verizon Wireless would be expensive for the UK firm, but not impossible. And it’s becoming increasingly clear there’s little benefit in combining mobile and landline telephone operations. Verizon should at least consider a sale to Vodafone.
