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Vodafone investors withdrawing over the last year has opened the door for the Emirati operator group to increase its stake in the business

It is no secret that Vodafone has been facing serious financial pressures recent years, with investors squeezing the multinational operator to implement major changes and turn its fortunes around.

Indeed, for many years Vodafone has been relying on the prospect of consolidation in its most competitive markets ­­– including Spain, Italy, and the UK – to alleviate the financial strain. However, despite rumours (and seemingly progress with Three in the UK), few deals have ultimately been struck, leaving the company’s management to face the ire of its disgruntled shareholders.

By October last year, one Vodafone’s most outspoken investors, Cevian Capital, had sold most of its stake in the company, arguing the operator’s situation appeared unlikely to improve. Just a week ago, another of Vodafone’s activist investors, Coast Capital, was reported as offloading its shares, saying that the strategy behind its initial investment had proven ‘incorrect’.

Not all of Vodafone’s investors appear to be so pessimistic, however.

e&, formally Etisalat, took a near 10% stake in Vodafone back in May last year for £3.3 billion, saying at the time that the opportunity would allow them to “gain significant exposure to a world leader in connectivity and digital services” as well as develop their international portfolio.

Since then, the Emirati operator group has gradually increased its stake in Vodafone, upping its investment to 11% in December last year and reportedly now 12%.

“Executed at what we believe is an attractive valuation, the investment rationale is unchanged from our announcement on the 14th of May 2022, specifically to obtain significant exposure to a global leader, and leverage potential commercial partnerships, and realize a future return on our investment,” explained the operator in a statement.

Etisalat rebranded as e& back in February, splitting its operations into various arms, including e& Life (consumer services), e& Enterprise (enterprise services), and e& Capital (investment). The move was aimed not only at increasing the company’s ability to capitalise on emerging opportunities, but also at expanding into international markets – both of which will seemingly be facilitated by its stake in Vodafone.

For Vodafone itself, meanwhile, major changes are already taking place. Vodafone’s CEO of four years, Nick Read, stepped down from the role at the end of last year and additional executive positions have been reshuffled since the start of the year.

Vodafone’s head of finance, Margherita Della Valle, is serving as interim CEO until a replacement for Read can be found.

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Taiwan’s National Communications Commission (NCC) has approved the mergers of Taiwan Mobile with Taiwan Star Telecom and Far EasTone with Asia Pacific Telecom (APTG)

For many years now, Taiwan has been a highly competitive mobile market, with five national mobile players vying for dominance.

Now, however, this is poised to change, with the NCC today approving two mergers that would see the market shrink from five to three players.

At the end of 2021, Taiwan Mobile announced that it had struck a deal to merge with its smaller rival Taiwan Star Telecom via a stock-for-stock transaction. Not to be left out, around a year later, Far EasTone announced a similar merger agreement with APTG.

The operators were quick to espouse the many benefits for the respective deals, noting the more effective use of combined 5G spectrum holdings, the reduction of unnecessary overbuild, and the energy efficiencies gained by shutting down redundant 3G and 4G base stations.

Perhaps even more important, however, would be the additional scale of the resulting entities, allowing them to more directly challenge the hegemony of incumbent operator Chunghwa Telecom.

Chunghwa Telecom currently dominates the Taiwanese mobile market, recording around 12.42 million reported in September 2022, equating to a market share of over a third. Taiwan Mobile and Far EasTone, meanwhile, are vying for second place, each with a market share of around a quarter. Taiwan Star and APTG are both smaller players, each with around 7%.

As a result, the Taiwan Mobile–Taiwan Star and Far EasTone–Asia Pacific Telecom (APTG) would create three players of comparable market share, ushering in what some are calling a “New Three Kingdoms Era” for the Taiwanese mobile market.

Naturally, such a shift in the Taiwanese market will require significant regulatory scrutiny, with the NCC having already applied various conditions, including 5G rollout targets and assurances that subscriber services would not be disrupted as they were transitioned from one network to another.

Another major hurdle is the issue of spectrum ownership. In the case of Taiwan Mobile, the merger would increase the company’s sub-1 GHz spectrum holdings to 60 MHz – 10 MHz more than the 50 MHz limit imposed on the original spectrum auction. As a result, the NCC has asked the company to return the 10 MHz of additional spectrum to the regulator.

Taiwan Mobile, however, has argued that all the nation’s telcos have exceeded the spectrum holding limits in various frequencies, bemoaning that to return the 10 MHz of bandwidth would have serious consequences for customers.

The NCC’s decision today makes it clear that Taiwan Mobile must have arranged a plan to rid themselves of the excess bandwidth by March 30 this year, whether by voluntarily surrendering it to the regulator, offloading it to an affiliated non-subsidiary, or exchanging it with other another unaffiliated telecoms enterprise.

The two mergers will now await final approval from the Fair Trade Commission.

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Reports show that smartphone uptake is stagnating, potentially offering a major hurdle for the adoption of 5G services

In the short time since launching 5G services, India’s mobile network operators have been rolling out infrastructure at a rapid pace, seemingly adding new locations almost daily. Reliance Jio’s 5G network reportedly covers 134 cities across India, while rival Bharti Airtel has said that most parts of the country should be covered by the new technology by March.

But while this is undeniably a very exciting time for India’s mobile market – the Indian government recently claimed India to be the largest “connected” country in the world – it belies a rather worrying trend: the number of new internet users in India is declining year-on-year.

According to a recent report by the Telecom Regulatory Authority of India (TRAI), India had around 837 million internet subscribers in June 2022, 92% of which were mobile broadband subscriptions.

This represents a growth of just 1% over 2021 figures, which themselves saw only a 4% lift on the total subscriber numbers from 2020.

Compare this with the double-digit growth rates seen in the 2016–2020 period, and it is clear that the Indian internet market is reaching something of a bottleneck.

“The number of new subscribers using the mobile internet per year plunged from pre-Covid levels of 60-70 million to around 35-40 million in CY2022, which has resulted in telcos potentially losing out on around a $300 million additional revenue opportunity, assuming that the extra 25 million new mobile broadband users would have easily generated at least $1 of incremental monthly ARPU for the operators,” said Tarun Pathak, research director at Counterpoint.

The primary culprit for this stagnating growth appears to be the nation’s smartphone market, with high device prices leading to a much slower rate of adoption by new customers.

The smartphone market has been hit severely by the global supply chain crisis, with its reliance on the glacial recovery of the semiconductor industry driving up prices since the coronavirus pandemic began. Last year, market researchers from International Data Corporation estimated that smartphone prices in 2022 had risen 20% on average since the early days of the pandemic.

This is in stark in contrast to the highly affordable smartphones of the 2010s, a decade which saw smartphone user numbers surge from just 34 million to almost 750 million.

Analysts suggest that these supply chain issues are unlikely to improve until the latter part of 2023 at the earliest, leaving it unclear whether India’s new 5G services will be enough to entice new customers to pay a premium for a new smartphone.

Unfortunately for the operators, against the backdrop of higher inflation rates and the global economic downturn it will likely be harder than ever to migrate customers away from their less expensive feature phones towards 5G-capable smartphones.

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