Tuesday, September 3, 2013

Huge and Risky Bets are Being Placed in Global Mobile Business

In the wake of Verizon’s purchase of the 45 percent of Verizon Wireless that it does not already own, as well as the Microsoft purchase of Nokia's handset business, huge and risky bets are being placed about the direction of the mobile business.

Nokia is getting out of handsets entirely, to focus on mobile infrastructure. Vodafone is exiting its strongest and most significant revenue-generating global market. Verizon Wireless is making a huge bet on robust mobile revenue growth in the U.S. market.

And that is only the beginning. What will follow is a major wave of restructuring among leading suppliers in the European communications markets as well, as Vodafone deploys its newly liquid capital and as other leading carriers decide they must buy or sell.

Already, there is speculation that AT&T might try to buy all of Vodafone when the Verizon transaction is completed. Vodafone is said to be weighing a purchase of Liberty Global, which only recently swallowed Virgin Media.

Telefonica is buying E-Plus in Germany and America Movil still is trying to buy all of KPN. Other deals will be proposed, and many will happen.

Beyond that, AT&T seems to be interested in a “mobile only” approach that combines elements of confidence in Long Term Evolution prospects in Europe, as well as growth in emerging markets.

Vodafone thinks it will do better if it reinforces its mobile offerings with ownership of fixed network assets.

Microsoft, at the beginning of a process to pick a successor to Stever Ballmer, Microsoft CEO, is betting that owning Nokia’s entire handset business gives it an ecosystem it did not have before to drive the Windows Mobile business, but at the risk of alienating existing licensees.

And some might ask what Microsoft actually gets by buying Nokia, when it essentially “owned” much of the value of Nokia by virtue of being the exclusive supplier of operating systems to Nokia.

The point is that very big and risky bets are being placed about where growth lies in the global mobile business.

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