British telco Vodafone and its US counterpart Verizon Communications are set to announce a new partnership this week, which will see them pooling procurement and selling services to multinationals, according to a Press Association report citing the…
British telco Vodafone and its US counterpart Verizon Communications are set to announce a new partnership this week, which will see them pooling procurement and selling services to multinationals, according to a Press Association report citing the Sunday Times.
According to the reports, some analysts also reportedly believe that this partnership could lead, in the long term, to Vodafone selling its stake in the mobile operator Verizon Wireless.
Verizon Wireless is a JV between Vodafone and Verizon. Vodafone holds a 45% stake in the company, while Verizon holds a 55% stake.
Vodafone did not reply to questions before the press deadline.
Verizon said that there was nothing new in this operational partnership.
During a live investor event on 25 January, Verizon’s COO Lowell McAdam said that in the past, the partnership between Verizon and Vodafone had largely been a financial one.
But he also said that the two companies were “putting together a strategy and a structure to operationalize this partnership by aligning our technical roadmaps, by gaining efficiencies through procurement and by putting together unified account teams to handle the multinational, large-enterprise corporations”.
He added that he felt the companies could do more to expand into “higher growth vertical markets to again deliver greater value for our shareholders”.
Verizon Wireless – Issues over dividends
There has been speculation for years that Verizon has been trying to push Vodafone out of the Verizon Wireless JV by not paying out dividends.
Dividends from Verizon Wireless were first suspended in 2006, with Verizon citing the JV’s large debt burden after its acquisition of its rival, the US mobile operator Alltech for US$14bn.
Rumours have circulated this year that Verizon Wireless was set to restart dividends. A Verizon Wireless spokesman told TelecomFinance in March that there would be no dividends in 2011, but the JV would reassess at the end of the year whether it should restart dividends in 2012.
The German magazine Capital reported in March that Vodafone’s CEO, Vittorio Colao, had said that the company had no plans to sell its stake in Verizon Wireless.
Procurement JVs
The reports of a new partnership between Verizon and Vodafone over procurement comes after the news in April that France Telecom and Deutsche Telekom were planning to set up a own procurement JV.
This will involve them combining their procurement of customer equipment, network equipment, service platforms and IT infrastructure.
In a joint statement, the French and German incumbents highlighted the synergies and cost savings that could be generated through the partnership.
They suggested that Deutsche Telekom would save over E400m from the partnership, while France Telecom would save below E900m.
Vodafone has shown some willingness to partner with Verizon in the past.
In February 2010, it announced a strategic alliance with Verizon Wireless and nPhase (a JV between Verizon Wireless and US chipmaker Qualcomm) in order to speed up the deployment of machine-to-machine (M2M) technology.
