Vodafone and Deutsche Telekom are fighting for a minority stake in Swisscom’s mobile operation.
Swisscom needs some outside help. Although its mobile division, Mobile Com, is highly successful, it is hampered by geography. It has 2.7 million customers, but is facing fierce competition at home. Given the size of the Swiss population it has little scope of expanding its domestic market share much beyond its current 68 percent. It’s too small to be a major 3G player in Europe on its own and also wants to roll out several of its most successful products, including pre-paid roaming, on a worldwide basis. To cross the Alps and extend its reach, Mobile Com must partner with an international player.
Large players like Vodafone and Deutsch Telekom often take minority stakes in other telcos to widen their network relatively cheaply and put them in a strategic position. The competition over the Mobile Com stake is likely to be fierce and not just because of its profitability. The Swiss UMTS auction will begin on November 13, and a strong partnership with Mobile Com could add strength to a bidding consortium.
But Swisscom shouldn’t kid itself as the two operators (and possible others – NTT DoCoMo is reportedly interested) fall over themselves to own a stake. The real attraction does not lie hidden behind the impenetrable mountains, but outside. Swisscom has a controlling stake in debitel, the German mobile operator which has a subscriber base of over five million and is growing at breakneck speed – 200,000 new customers per month. Any sensible mobile operator would want a share in the revenues. A stake in Mobile Com would effectively mean a stake in debitel.
Both Deutsche Telekom and Vodafone are good partners, but if the point of the deal is a road into the German market then Deutsche Telekom may face competition regulation problems. For the moment Vodafone looks best placed to becoming Swisscom’s channel to the outside world, although the UK operator may see it merely as a bonus compared to its share of the German revenue stream.
