It was only a few years ago that Vodafone was a mobile evangelist, intent on selling off its German fixed-line business as it did not fit the bill. By the end of 2005, it was talking about the potential of broadband and convergence, but adopted a softly-softly approach to broadband, based around signing joint venture deals with the likes of BT to keep hold of customers who wanted to source high-speed internet and mobile from the same provider.
Fast-forward to today and Vodafone is a fully fledged consolidator in the broadband sector after splashing out £537m on Tele2's Spanish and Italian fixed-line businesses. Vodafone has picked up nearly 650,000 broadband customers in two high-growth markets, yet it has also gained 2.4 million fixed-line voice customers.
It is a sign of the times that the only concern analysts have is the price, not exposure to fixed-line voice. Although it has only gained a market share of 4 per cent in the two broadband markets, Vodafone has paid a 30 per cent premium to the value of the assets under Tele2's ownership. But the company was accused of overpaying for assets in Turkey and India over the past two years, and it has quickly turned that sentiment on its head.
Under Arun Sarin's leadership Vodafone has become synonymous with investment in high-growth emerging markets. Yet its strategy in mature markets to cut costs and drive growth from new services such broadband is just as important. The Tele2 deal reflects that focus and strengthens the company's hand in two key European markets without materially affecting its financial performance. Despite various threats to the company's progress over the coming years, notably price deflation and regulation, the shares look a good bet to keep progressing toward the 200p level.
Source: http://news.independent.co.uk/business/comment/article3041116.ece
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