Vodafone's Extended Tentacles

 

Liberty Global Europe was facing a bleak future in offering digital services. On the other hand, Vodafone was looking to diversify its influence in the digital service platform and Liberty Global’s limp could be seen from a far. A rescue mission was mooted and Vodafone wasted no time looking their way.

The acquisition was ripe and came at the right time to undo the slow growth that was as a result of under-capitalization and debts that riddled Liberty Global. This was like a match made in heaven, both parties were to benefit by complimenting each other culminating into a giant digital service provider.

Following is a brief analysis of the merger and acquisition that was spearheaded by Vodafone despite the European Union’s hawk-eye.    

 

Awareness

Vodafone bought Liberty Global Europe’s assets at USD 21 Billion (EUR 18.4 Billion) and its debt of USD 7.6 Billion. 

To further enhance its growth in the convergence services it needed a foothold in Hungary, Czech Republic, Romania and Germany (Walle 2020). In these countries the single entity will have a reach of 161 million customers on mobile services, 24 million on gigabit data transmission and over 10 million in cable and television subscription. 

The merger elevated their status to one of the largest players in Europe and will help them offer competitive prices in an over-saturated but demanding and diversified market.

Conversely, the merger was regarded by smaller players as a way of killing competition in the telecom industry. Investigations by the European Union to establish whether the acquisition would lead to this, at first concurred but later concluded otherwise after reviewing the terms spelt out in the transaction. 

Despite the detailed analysis of the process by the European Union, thus over 500,000 internal documents (European Union 2019) other medium sized or new upcoming players were not convinced and have expressed fear of more such like mergers which will create monopolies. 

It can be observed; the merger might drive down prices of digital services, offer diversity, spur more innovative packages and create a demand for more efficiency from the telecom companies.

Desire

Change is constant in an ever changing world that results in new opportunities that serves as a basis for business. 

Vodafone having specialized in digital service provision; facing a decreasing market share spread, acquired Liberty Global Europe which was in debt and lagged behind in next generation digital service provision. A case in point Germany; Liberty Global needed more capitalization and increased infrastructure to match Deutsche Telkom and drive up its revenue. Together they have a 60 percent share of fixed telecom market making them the two largest players in this category (Gröne et al 2019, pg. 10). 

The merger signified a larger market share, stronger capitalization and more diversity in the service provision. Perhaps the greatest effect is a larger geographical reach, for instance; Virgin Media United Kingdom and Ireland is 100% owned by Liberty Global. Vodafone, the leading telecom digital service provider did not only acquire it and increasing their footprint in the UK but also did the same for Telenet Belgium 60.2%, UPC Holding Switzerland, Poland, Slovakia 100.0% and Vodafone Ziggo Netherlands 50.0%.

These acquisitions meant Vodafone as the parent company had to intertwine its philosophy of business with that of Liberty Global. Liberty Global employees needed assurances of their job security and ensure no duplication of roles and overlapping services. The leadership of the single entity had a responsibility of making sure there is no overbearance of executives from Vodafone towards those of Liberty Global and vice versa depending on the sphere of influence. This sense of high privilege of either executive was prone to be an issue if not well addressed. Additionally, sabotage by executives of the two entities can be a frequent occurrence as a way of protest or dissatisfaction of the merger especially if they felt left out in the consultations regarding the process of acquisition.

Knowledge

The merger of Liberty Global and Vodafone exemplifies knowledge by the players to bring in change by diversifying, increasing infrastructure and offering an advanced hybrid service described as convergence to a larger and broader spectrum of clientele. 

Convergence is where fixed and cell phone services appear to be losing their distinctive nature. 

In this mode of service what was/is predominantly offered by a Network Mobile Operator (NMO) can be offered to a client with a fixed line (Walle 2020). Both clients in this platform will be able to purchase combined services as a single package from one service provider at one price.

Balancing price and package is at the core of digital service provision ensuring constant growth of profits. 

Overall average Revenues per account (ARPA) has decreased by 11 percent in the last ten years and only 3 percent in the last year. This means the largest service providers in most markets have managed to maintain their prices amidst stiff competition due to their large client base affording them economies of scale compared to medium sized service providers. 

The fixed high fee for the new entrants in this service provision still remains a huge barrier allowing the already established telecoms to continue their dominance (Gröne et al 2019, pg. 7). The merger seeks to remedy this existing challenge though in the near future it will again be the source of the same problem.

 

Ability

Vodafone and Liberty Global Europe are the same at the core but different in capitalization and sphere of influence in market share. The merger has been observed as an extension and domination of two giant entities that have set their eyes on complimenting each other. 

Vodafone is a telecommunications company who later integrated converged services and Liberty Global is an internet broadband, cable TV and video service provider (convergence). 

The single entity is a force to reckon with in telecommunications, internet broadband and cable TV network. They will wield great power in the digital industry and may not drive prices down but rather maintain them (Florentina and Ana-Maria, 2018, p.4). New entrants offering differentiated services will find it difficult to operate considering the financial might of this entity. They will be bought off and will not be able to stand a pricing war in case they are offering a unique coveted next generation digital service. 

The change might not be new differentiated packages but larger coverage and efficiency bolstered by added infrastructure to sustain and rope in more clients.

 

Reinforcement

The added financial muscle of Vodafone to Liberty Global should help offer their unique services more reliably to their existing and new clients. Advertisements with regards to what Vodafone offers that might be slightly different or advanced than Liberty Global’s, should serve as an appeal to the rather dissatisfied clients. Germany in particular has had dissenting voices over the slow advancement of digital technology especially in internet broad band (gigabit data transmission). 

Vodafone on the other hand adds extra infrastructure and finance to improve efficiency and scale up service provision for next generation digital services. The merger catapults Vodafone and Liberty Global to one of the leading telecommunication and digital service providers in the world; a brand in itself that will serve to only grow bigger in future.