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Verizon, Vodafone deal points to move toward integrated wireline, wireless services

Verizon?s move to acquire the 45 percent stake in its wireless operations owned by Vodafone underscore the growing focus on integrated wireline, wireless services for United States carriers.

British telecommunications firm Vodafone decided to exit the U.S. wireless industry at a time when other international carriers such as Softbank and T-Mobile are beefing up their investments. Vodafone?s move is likely more a strategic one than a negative reflection of the opportunities in the U.S. market.

?The U.S. is still a good market to be in, but Vodafone saw a good opportunity to cash out at a time when it is pressured to return more to stockholders and to respond to threats and opportunities for integrated wireless/wireline services in its core European markets,? said Susan Welsh de Grimaldo, director of mobile broadband opportunities at Strategy Analytics, Boston.

?Vodafone has made some recent investments in cable in Germany, and this opportunity also helps to pay down debt from that deal,? she said.

Industry consolidation
Verizon, the largest wireless carrier in the United States, said it will pay $130 billion to purchase Vodafone?s 45 percent stake in Verizon Wireless.

Verizon had reportedly been looking to buy Vodafone?s 45 percent stake for quite some time but was unable to reach a deal that was acceptable to both sides until now.

The British wireless carrier will return a large portion of the proceeds to its shareholders while also proceeding with a plan to boost existing operations by accelerating 4G LTE network deployment.

Now that a deal has been announced, this could spur on the international aspirations of AT&T, the second largest U.S. wireless carrier. There is even speculation that AT&T could purchase Vodafone, a deal that would make more sense now.

The news follows Japanese carrier Softbank?s $20.1 billion investment in Sprint last fall.

International wireless carriers have been interested in U.S. companies because the market is quickly growing, with a lot of upside potential still to come (see story).

Integrated user experiences
Verizon and Vodafone are both expected to focus more on delivering integrated user experiences across wireline and wireless for a stronger multiscreen play as competition increases.

Consumers are increasingly shopping and consuming a variety of digital content across multiple screens, including smartphones, tablets, laptops, desktops and televisions.

With these users looking for seamless, integrated experiences across all of these devices, platform providers, hardware manufacturers and providers of wireless and wireline services are all looking for ways to shore up their cross channel offerings.

While mobile users in the United States are used to signing up for two-year wireless contracts that are typically independent of their cable and Internet services, there are likely to be more combined service plans going forward.

Now that Verizon fully owns its wireless operations, it will be better positioned to offer such multiscreen service bundles.

?We will begin to see more cross-industry competition as the big players move to create a more seamless user experience across fixed and mobile network services,? Ms. Welsh de Grimaldo said.

?Multiscreen service bundles is where competition for premium and mid-tier subscribers is heating up, Verizon will be well positioned to put the heat on Sprint and T-Mobile U.S.,? she said.

Shifting landscape
Verizon?s more integrated approach could put pressure on smaller wireless competitors whose offerings are limited to one screen, per Ms. Welsh de Grimaldo.

Smaller wireless carriers have typically tried to compete by offering lower-priced service plans.

However, as multiscreen plans gain, these smaller wireless carriers may find themselves pushed further out of the premium wireless market.

An expanded push from Verizon in multiscreen services will also force its cable competitors to consider building up their limited wireless portfolios.

?It will be interesting to see how Sprint and Softbank respond over the next couple years? their spectrum depth with Clearwire may provide an opportunity for in-home multiscreen bundles with LTE-Advanced to compete with Verizon, AT&T and the cable companies for premium spenders,? Ms. Welsh de Grimaldo said.

?T-Mobile may find itself making headway in the value seeking segments of the market but may find it tough going to woo away mid-tier subscribers,? she said.

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York