Expect Big Things Post Big Red Sale

Surprise!

The announcement of a change of ownership for Vodafone NZ came as a bit of a surprise to the industry. Until this week, media and analysts expected Vodafone NZ to float an IPO (Initial Public Offering) next year.

Purchaser Infratil's portfolio includes businesses within renewable energy, data, aged care, and airports. Infratil describes joint purchaser Brookfield as a global infrastructure investment partner. Infratil CEO Marko Bogoievski says Vodafone NZ will play a core part of Infratil's cashflow predictability. The purchase also offers some 'attractive' growth options in what Infratil feels is a sensible market place.

Seller Vodafone Group has operations dozens of markets worldwide.  It also has debt of €31 billion.  For Group the value is to pay off some debt, and to exit a relatively small and mature market to focus on larger and emerging markets.  

Vodafone New Zealand has grown from selling consumer mobile services starting in 1998 to a full service telco in 2019. Its sale out of Vodafone Group lets Vodafone NZ execute a New Zealand centric strategy while retaining Group services, where they make sense.

A New Zealand Centric Strategy

Vodafone NZ CEO Jason Paris says the company will be free to execute a local strategy. In the past, it often needed to go to market with Group mandated deployments.

In its local strategy Vodafone NZ wants get more customers on to fixed wireless broadband.  This avoids a wholesale fee and mobile network operators say it means a better customer experience. 4G fixed wireless broadband is an alternative for poor-performing copper but that addressable market continues to shrink as people switch to fibre. By now, Spark has already nabbed the lion's share of the addressable market. So, is Vodafone planning to offer 5G fixed wireless broadband services as an alternative to entry level fibre connections?

Bogoievski voiced his support for a shared 5G infrastructure. He said there are "options to cooperate and share rather than spend billions on infrastructure". He wishes to promote a model that includes network sharing, wholesale arrangements and avoiding duplication, so long as operators on the infrastructure can make a commercial return.

This is some different thinking to what we've seen from the mobile network operators in the past. It suggests the potential for some new divergent perspectives and strategies from the New Big Red. Getting this local strategy right could up the ante for innovation. Competitors resting on their laurels knowing Vodafone was hamstrung to Group's strategy will need to reassess.

Keeping the Best from Group

Vodafone NZ's sale will see it shift from a Vodafone Operating Company to a Vodafone Partner. In fact, it will become the "Number 1" partner market, according to Paris. Partners can use Vodafone international services (e.g. Roaming, Vodafone TV, and its IoT platform) without Vodafone Group needing to invest.

Vodafone NZ will retain the Vodafone brand, "for as long as we feel it's the right thing to do". Bogoievski and Paris did not disclose brand royalty fee. In the proposed SKY/Vodafone merger brand royalties were proposed at NZ$31.4 million per year. One option now open to Vodafone NZ will be too create a price-led sub-brand such as Skinny is for Spark. Or they might do a "full Telecom" and decide to rebrand both the value-led and price-led parts of the business.

Moving Forward Without Distraction

It has been a busy time for Vodafone OpCos across Asia Pacific. The Commerce Commission thwarted Vodafone New Zealand and SKY's proposed merger in 2017. Vodafone India and Idea Cellular completed their merger in 2018. This month the ACCC (Australian Competition and Consumer Commission) announced it opposes a planned merger between telcos Vodafone Hutchison Australia and TPG.

The proposed Vodafone/SKY merger, the impending IPO, the sale preparations, a new CEO and changes in the management team have all been distractions for Vodafone New Zealand. The sale should put all those activities, and speculations, to rest and allow the new ownership to focus back on to core business.

Want to Find out More?

This post is based on the IDC Market Note subscription report: Big Red Sale Out of the Blue: Vodafone NZ Ownership Change means Shift to New Zealand Centric Strategy. To talk to an IDC analyst on this topic, or acquire the full IDC Market Note, you can direct message the author, Monica Collier, on Linked In or Twitter, @monicoller, or contact IDC via our website https://www.idc.com/anz/contact-us