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Tuesday, June 13, 2006

Vodafone - The Alternate Strategy – part I

Now the share price is getting back to pre-Japan disposal levels, obviously the short term bribe and nebulous strategy didn’t have the desired effect.

vod 1yr share price
Perhaps the best thing to do is to go back to basics and do the simple things well and there can nothing simpler for a communications company than communication itself.

I’ve always found that when the troops are eye deep in hell fighting their corner in the 21st Century Telco Trench War inane banter is not the order of the day and more likely to aggravate the troops rather than rally them.

“Go Vodafone” might work with an American High School Baseball Team, but it is just not going to work when your UK consumer division is getting overrun by T-Mobile. What you need is a decisive strategy; in fact it doesn’t matter if the strategy is wrong in short term, because any strategy clearly communicated is much better than inertia and slidewear.

The real question is does VOD:
- turn the situation into a war of attrition and fight back in the uk? Accepting again that there will be a drop in margins. If it gets really painful, the 5th MNO might have to exit the market.
- turn defense into offense and attack the T-Mobile Cash Cow ? Again it will hurt margins in the short term, but sometimes the 100lb Gorilla has to use its’ power to survive in the jungle.
- let the consumer market in the UK slip (for the time being) and focus on the corporate sector? Again, there will be probably a drop in margins as economies of scale are lost.

To me it is crazy to think of expanding into Broadband at a time when the consumer division is so weak. Fair enough in Germany, but fix the root cause of the problems in the UK before expanding into new territory. I don’t have my calculator handy, but I'm sure that even a bloodbath in the Mobile UK Consumer Market won’t reduce margins to broadband type levels.