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Hank Levine and Ben Fox | April 02, 2013 |

 
   

The Vodafone/Verizon/AT&T Rumors: What Would It Mean for Enterprises?

The Vodafone/Verizon/AT&T Rumors: What Would It Mean for Enterprises? The possibility of a blockbuster deal would have major impacts on how global wireline and wireless enterprise contracts are crafted.

The possibility of a blockbuster deal would have major impacts on how global wireline and wireless enterprise contracts are crafted.

The various rumors over the last couple of months regarding Verizon acquiring Vodafone's stake in Verizon Wireless, or even a merger between Verizon and Vodafone, have culminated in a report in April 2's Financial Times that BFFs AT&T and Verizon Communications are collaborating on an offer for Vodafone that would (finally) give Verizon 100% ownership of Verizon Wireless, while AT&T took Vodafone's non-US assets. (The principals are denying that such a deal is imminent.)

However, if the rumor proves to be well founded--and that's an awfully big if--the resulting transaction(s) would not only be the biggest M&A deal ever, it would also have important effects on the Enterprise customers of all three companies, which pretty much means every Enterprise customer. Here's a rundown:

* Vodafone customers would be affected the most by any deal--and the fact is that most multinationals have a relationship with Vodafone in some part of the world. M&As are always extremely distracting, despite the "business as usual" messages that emanate from senior management of the companies involved: expect account team turnover and inertia on deals until the dust settles. And for those (relatively rare) Vodafone deals that include Verizon Wireless services, the Verizon Wireless aspects would likely need to be wound up over time.

* The split ownership of Verizon Wireless has long been blamed for Verizon's unwillingness to meaningfully integrate wireline and wireless services under a single master agreement with one commitment and uniform terms, and the recent integration of Verizon Business and Verizon Wireless account teams under the Verizon Enterprise banner has yet to have real impact on this. If Verizon acquires Vodafone's 45% share of Verizon Wireless, there should be no more barriers to integrated Verizon wireline/wireless deals.

* Vodafone has long positioned itself as the only truly global wireless provider, and its global footprint is indeed larger than that of any other wireless carrier (although it can struggle to deliver on ambitious sales messages because it relies on partners in many countries). But Vodafone has at best a fledgling wireline business (boosted by last year's acquisition of Cable & Wireless Communications), and this deal would--sadly--obviate the rise of Vodafone as a new global carrier before it has really begun.

* That said, the combination of Vodafone's global wireless presence and AT&T's global fixed line and managed services would create a uniquely comprehensive set of global wireless and wireline services that will be marketed as a single provider for all of an Enterprise's telecommunications needs globally. Expect AT&T's marketing and sales department to work that line very hard. And CxOs will lap it up, even when the new company can't actually deliver on "global one-stop shopping" promises.

* Vodafone's global contracting and pricing approach has always been structured around the individual countries in a particular deal. That's because each individual Vodafone operating company has its own P&L, and also because Vodafone is often leveraging partners (who are not Vodafone affiliates) to provide global coverage. This is very different from AT&T's approach, where pricing for network products is developed and offered globally. AT&T does not worry about individual countries' P&L when offering you pricing for a global MPLS network--the global deal is considered holistically. Changing the approach that Vodafone has historically taken to align with how AT&T runs its Enterprise business will be a challenge, but one that could be beneficial to Enterprise users.

* There is also a regulatory issue, as the deal would have to be approved by just about every significant antitrust authority in the world. If only because of the names and the size of the transaction, the transaction will be closely scrutinized. While there will certainly be a loss of a potential competitor, for reasons alluded to above we are not sure there will actually be a real diminution of competition unless one believes that the emergence of a global mega-giant is itself anti-competitive. That theory isn't much credited in the US, but the EU authorities tend to be more aggressive on competition questions nowadays, especially in the tech world.

* Vodafone has historically complained that it struggles to be competitive on rates for international roaming voice and data when its users under non-US deals are using their wireless devices in the US. Vodafone and Verizon Wireless' networks are incompatible (GSM and CDMA respectively), so the Verizon Wireless relationship has not helped in this area. As AT&T is GSM, its acquisition of Vodafone would seem to solve that issue (at least over the longer term).

We'll continue to assess the implications for enterprise users, but expect a lengthy process before any deal is concluded.

Hank Levine is a partner in the Washington, D.C. law firm Levine, Blaszak, Block & Boothby, LLP, which specializes in the negotiation of telecom and technology agreements on behalf of Fortune 100 (and equivalent) users. He can be reached at hlevine@lb3law.com. Ben Fox is a Managing Director at TechCaliber Consulting, LLC, a global technology and telecom consultancy that advises the world's largest companies on strategies for reducing their costs for telecom and technology products and services. Ben can be reached at bfox@techcaliber.com.



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