Whether to spend billions of dollars acquiring a U.S. mobile operator lock, stock and barrel could prove to be one of the hardest calls Arun Sarin, chief executive officer (CEO) of Vodafone Group PLC, may ever have to make.
Sarin, just six months into his new job at Europe's largest mobile phone company, faces what could be one of the biggest opportunities of his career -- the prospect of acquiring AT&T Wireless Services Inc. and establishing a bridgehead in the important U.S. market. It could also be, undoubtedly, one of the biggest gambles he may ever take, especially if the financial community refuses to support the move.
Ever since AT&T Wireless, the third largest mobile phone company in the U.S., put itself on the block, Vodafone has been on the tip of nearly every expert's tongue as a likely buyer. And for an obvious reason: Vodafone, with a penchant for controlling companies fully, is a junior partner in Verizon Communications Inc., the largest U.S. wireless operator in which the Newbury, England, company has a 45 percent stake.
What's more, Vodafone is aligned with a company using a mobile phone technology, CDMA (Code Division Multiple Access), which is incompatible with its GSM (Global System for Mobile Communications) infrastructure. Synergy between the two networks is nearly zilch.
To buy or not to buy? That's the question Sarin eloquently sidestepped last month in a conference call to present the group's key performance indicators. Vodafone is watching developments in the U.S. "through the lens of shareholder value creation," the CEO said. "Nothing is imminent but our interest is high."
Even if Sarin isn't about to let the cat out of the bag before the Feb. 13 deadline for companies to submit their bids for AT&T Wireless, beginning at around $30 billion, many industry observers expect him to enter the fray.
AT&T Wireless could, indeed, be the last opportunity for Vodafone to gain control of a U.S. operator with a GSM network, according to Michael Ransom, senior analyst with Current Analysis Inc. "It's kind of now or never," he said.
The other GSM operator, T-Mobile USA Inc., appears to be an unlikely seller. Kai-Uwe Ricke, CEO of Deutsche Telekom AG, which owns the U.S. operator, has repeatedly underscored his commitment to the North American market.
Vodafone's keen interest in taking full control of a U.S. operator -- and especially one with a GSM network -- is linked to the company's strategy of establishing a global brand, harmonized customer services and economies of scale in its phone and network infrastructure equipment, according to Ransom. "This is a company that preaches cross-border seamless services and harmonized customer interfaces," he said.
The company's Eurocall tariff plan, which offers discounts to customers phoning within the Vodafone network, and its Live mobile Internet service are some good examples of the operator's harmonization efforts, according to Ransom. "A key factor is having uniform back-office systems," he said.
Vodafone has also been able to achieve huge savings by purchasing equipment in volume, most recently to upgrade its networks with new 3G (third-generation) technology based on W-CDMA (Wideband-CDMA), a company spokesman said. Verizon, however, supports another variant of CDMA technology for its 3G upgrade.