Verizon, Vodafone Making Different Bets on Market Growth?

Either way you look at the strategic challenges, both Vodafone and Verizon Communications are making big bets in assessing whether the U.S. or European markets are better places to invest for growth.

You might argue Verizon Communications is betting that the U.S. market is going to remain robust, so capturing all of the returns from Verizon Wireless makes sense.

You might also argue that in selling its highest-revenue operation, Vodafone is making the opposite calculation, namely that despite a clear revenue down trend in Europe, Vodafone’s prospects actually are higher in Europe than in the U.S. market, which virtually all observers currently estimate will grow revenues .

AT&T appears to agree with Vodafone, specifically because the undeveloped state of Long Term Evolution in Europe will allow for revenue growth, once the networks are activated.

Others might argue that Verizon Communications is gambling a bit that the U.S. market has not reached a revenue peak, in terms of revenues. Some would argue that increasingly competent new attacks by a revitalized T-Mobile US and a SoftBank-driven Sprint will lead to a major price war that will depress industry revenues.

In Western Europe, for example, revenue is forecast to drop through 2020, for example. Some would attribute that weakness to competitive pressures.

By way of comparison, the U.S. market is viewed as less competitive, and Verizon is betting that it will do better by essentially increasing its U.S. mobile exposure, since mobile contributes about 86 percent of total Verizon Communications revenue. Fixed network operations contribute only about 14 percent.

Keep in mind that it was Vodafone that sold its struggling Japanese asset to SoftBank in 2006. Vodafone executives might expect that something similar will happen in the U.S. market, as a SoftBank-owned Sprint attacks U.S. mobile industry pricing structure.

NTT DoCoMo was the dominant service provider then, as Verizon Wireless is now. NTT DoCoMo still holds that position, but gross revenue and profit margins have been battered.

“If you’ve watched what happens when Softbank enters a wireless market, you might not want to watch it again,” said Craig Moffett, senior analyst at Moffett Research.

Right now, observers expect U.S. mobile revenue growth, just as they expect declines in many parts of Europe.