[3GScottishUser]

From The Independent (14/11/2006):

VODAFONE, the world’s biggest mobile phone operator, surprised investors yesterday by signalling an interest in buying its rival 3, in a return to a more adventurous acquisition strategy.

Arun Sarin, the chief executive, who has recently adopted a cautious approach to new acquisitions, said that if 3’s European assets went up for sale “then we would look at them”.

Mr Sarin said that the time “may be ripening” for consolidation in markets such as the UK, and 3 “would be one candidate” that looked vulnerable. Analysts value 3 UK at about €4 billion.

Vodafone’s apparent willingness to act as market consolidator overshadowed a forecast-topping set of results for the six months to September 30. Excluding an £8.1 billion writedown on Vodafone’s German and Italian businesses, which pushed the group to a pre-tax loss of £3.3 billion for the half, the company reported a pre-tax profit of £4.8 billion.

Earnings before interest, tax, depreciation and amortisation (ebitda) rose 3 per cent to £6.24 billion, against a forecast range of between £5.98 billion and £6.19 billion. Investors were also cheered by Vodafone’s reassessment of its tax rate, with its longer-term effective rate now expected to be in the low-30 per cent range, rather than the mid-30 per cent range previously expected.

In his first set of results since investors holding 15 per cent of Vodafone shares refused to back his re-election, Mr Sarin said that the group was also on the lookout for acquisition opportunities in emerging markets. Asia, South Africa and Eastern Europe are target areas. He emphasised, however, that any acquisitions would need to meet strict financial criteria set out by the group in May as part of its new strategy.

Analysts have long speculated about the future of 3’s UK business. particularly since the group’s owners, the Hong Kong- based Hutchison Whampoa, failed to pull off a planned flotation of its Italian business. A successful float would have paved the way for a listing of the UK business. A spokesman for Hutchison Whampoa said that it had no plans to sell any assets.

http://business.timesonline.co.uk/article/0,,9076-2453855,00.html

[Ben]

I'm struggling to see the reasoning behind this... in terms of 3G services Vodafone and Three are pretty evenly matched, both boasting by far the most competent 3G portals. In terms of coverage Three does have the upper hand with its many small 3G masts and a seamless handover to Vodafone's existing network would finally make for a well-performing network, but Vodafone is already so good at building out a good network that I can't see it gaining €4bn's worth of goodies!

Add in that Three has few assets, a churning subscriber base and cheap tariffs and I'm even more confused.

Any ideas as to why Sarin thinks 3 is worth having?

[3GScottishUser]

I think Sarin is interested in the bandwidth and the customer base to some extent.

I suppose its the old logic of being the #1 in the market and having 1 GSM and 2 UMTS networks would make Vodafone the major player in the UK overtaking 02 and providing plenty of capacity for services like video and TV.

The price of the 'assets' would be a key factor and its not plausable that Vodafone or anyone would pay anything like what HWL have invested to date. The big decision for HWL is whether to tough it out losing money and making little headway or to exit like NTT DoCoMo and KPN did nursing massive losses on their investment. Neither is a good prospect but one has to prevail and there appears little prospect of the business improving in the next two years to any extent that would deliver improved exit conditions.

The suits in Hong Kong have some serious thinking to do in the next few months and they now know there are doors to chap if they need to.

[Hands0n]

Add to that that Vodafone have Sir John Bond working for them now, and his contacts with the Hong Kong elite are legendary. It is quite plausible that Sir John has been instrumental in sparking this interest in 3 - quite possibly from discrete conversations with Hutchinson Whampoa who may have approached him even!

[Ben]

Vodafone are going to get a name for themselves if they keep buying the networks Hutchison makes ;)

[3GScottishUser]

Well they had to dispose of the last one in the UK they bought....

bet there are not many here that know that Vodafone actally ran Orange for a while before they sold it to France Telecom.

I doubt if any regulation issues would prevent them integrating lame duck 3 into their UK operation now as Ofcom are realists and are well aware of the impact 3 have made (or lack of it). They also can see how MVNO's are now folding and that the volume of competiton is intense and will remain so with such stong International players in the UK mobile market.