In March this year, Vodafone announced that it was paying $3.5bn in cash for the eastern European assets of Telesystem International Wireless, a holding company based in Montreal, Canada. Specifically, Vodafone said it was acquiring 79% of Romanian mobile phone group Mobifon (it already owned 20%), and 100% of the rapidly growing Czech wireless operator Oskar Mobil.
Vodafone’s wholly owned subsidiary, Vodafone International Holdings BV, has now completed the acquisitions of MobiFon and Oskar Mobil. These purchases will provide Vodafone with access to markets that are experiencing rapid growth compared to the saturated markets of western Europe.
The move eastwards was effectively forced on the Newbury, UK-based operator after its defeat in February 2004 when it lost out in the fierce bidding war for US mobile operator AT&T Wireless Service. The winner, Cingular Wireless, was forced to pay a staggering $41bn plus. The consolation was that Vodafone saved $40bn and still remains a minority shareholder in the second largest US mobile operator, Verizon Wireless.
It also proved to be good news for Vodafone’s employees, who are now expected to share a GBP 230m ($419m) windfall this summer, a move that will see seven out of 10 of its 56,000 workers collect about GBP 5,000 ($9,115) each. Vodafone’s shop floor staff, call center operatives, and middle managers will all be among those eligible to cash in on share options with a strike price of 90p ($1.64).
Vodafone has 154 million customers in 26 countries around the world. Despite this, it is struggling to maintain strong growth levels. It recently reported a loss of GBP 7.5bn ($13.8bn) for the year to March 31, down from a loss of GBP 9bn ($16.5bn). Revenue rose 1.7% to GBP 34.1bn ($62.4bn).
The operator also warned that increasing competition and a weak performance at its Japanese subsidiary was likely to squeeze margins in the coming year.
The problem is that Vodafone mainly operates in saturated markets. Market penetration averaged more than 90% in Western Europe at the end of September last year, and has climbed to more than 100% in Italy, Sweden, Greece, and Portugal, according to research by BNP Paribas.
