Can Vodafone Group Plc Hold Its Own In The Global Telecoms War?


The global telecoms war is heating up and companies like Vodafone Group plc (LSE: VOD) (NASDAQ: VOD.US) are fighting to acquire smaller around the world while sales in their domestic markets slow.

But can Vodafone keep up with its largest and more powerful international peers?

In Europe

Europe is the currently the largest theatre in the telecoms war as Vodafone and US firm Liberty Global fight  to consolidate the continent’s fragmented market.

The most recent battle is over Ono, a Spanish cable company worth around €7 billion, and both companies are trying to scuttle each other’s takeover attempts. This is not the first time the two giants have locked horns over a deal like this, however. Liberty previously sought to derail Vodafone’s bid for Kabel Deutschland and Vodafone recently tried to hamper Liberty’s deal with Ziggo, the Dutch cable group that agreed a deal with Liberty only a few days ago.

Further, there is some speculation that both companies will make a bid for Italy’s Fastweb and some City analysts have predicted that Vodafone could join forces with BSkyB.

However, as Liberty and Vodafone try and outbid each other, the prices they are willing to pay for acquisitions is increasing. Unfortunately, this means both companies are acquiring their targets at a historically high valuations, which could turn out to be a bad move, as Vodafone is only too aware of.

Over in India

Meanwhile, over in India, Vodafone is having to re-purchases mobile spectrum rights to operate its network in large cities such as Mumbai and New Delhi. The Indian government re-auctioning these rights despite fierce opposition from Vodafone and India’s other key telecoms provider, Bharti Airtel. Both companies groups claim that their contracts ought to allow them to reacquire the spectrum without competitive bidding.

Nevertheless, the government is going ahead with the sale and so far, eight companies have bid a total of $7.1 billion for $1.8 billion of available spectrum. Bidders include Reliance Industries, which is planning to launch a superfast 4G telecoms data business this year.

With so many bidders fighting over spectrum rights, a price war could be on the cards.

What about AT&T?

But what about the widely speculated acquisition of Vodafone by AT&T? Well, it would appear that AT&T is having problems of its own within its domestic market, where it is losing out to T-Mobile US and Verizon Wireless.

As a result, AT&T has ramped up capital investment within the US and is now likely to have less cash available for overseas acquisitions. In addition, there is reason to believe that AT&T could seek to increase its dominance in its home market by acquiring a domestic pay-tv company, rather than expanding overseas.

Foolish summary

So, the global telecommunication war is heating up and Vodafone is having to get aggressive to stay in the game but with a history of poorly timed acquisitions behind it, Vodafone needs to be extremely careful.

Sit back and relax

So, with the war in the telecoms sector heating up, Vodafone may not be your best bet on the sector. However, telecommunications stocks are well known for their hefty dividend payouts and a portfolio of stocks that pay a healthy dividend can be a great way to earn a passive income.

Fortunately, there are plenty of other opportunities out there and the Motley Fool's top analysts have put together this free report entitled, "The Motley Fools Guide To Investing In Telecoms" to help you discover the sector's best opportunities.

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> Rupert does not own any share mentioned within this article. The Motley Fool has recommended shares in BSkyB.