Vodafone announced Monday the sale of 100% of its Vodafone Sweden subsidiary to Telenor of Norway for €1.035bn (US$1.24bn). With 1.5mn subscribers, Vodafone currently has a 15% market share in Sweden, yet the company claims a higher level of ARPU than its three rivals (TeliaSonera, Tele2 and Hutchison 3) and claims a 30% share of the business market.

The deal will give Telenor 100%-owned mobile operations in Sweden, Norway (Telenor Mobil) and Denmark (Sonofon) with a combined total of 5.7mn customers. This Nordic dimension was acknowledged by Vodafone’s CEO, Arun Sarin: “we have a good business in Sweden, but the particular industry structure and regulatory environment means that it makes more sense for our customers, our employees and our shareholders for a pan-Nordic player like Telenor to own the company.”

"This purchase will improve Telenor's competitive edge in the Swedish mobile market, and it will also improve our economic scale in the Nordic region", said Morten Karlsen Sørby, executive VP of Telenor. Those who accuse Telenor of overpaying for the Swedish unit may have failed to factor this synergy into their calculations, as well as overlooking the long-standing obsession of all Nordic telcos with their neighbours’ markets.

Do this, do that
The move comes just days after Vodafone laid out US$1.5bn for a 10% stake in Bharti Tele-Ventures Ltd (BTVL), the number three operator in India with 14mn subscribers and a 21% share of the market in that country. For details, click here.

The contrast between the two deals could not be greater – to the extent that only the price tags have anything in common. The intriguing question is whether, taken together, they add up to a shift in strategy at Vodafone.

For more than two decades, Sweden has been regarded as one of the most advanced mobile markets in the world. That fact alone would lead you to expect that Vodafone, as the world’s leading mobile operator, would want to be strongly represented there. It’s a surprise, therefore, to see Vodafone throw in the towel amid mutterings of too much competition, regulatory factors and a squeeze on pricing. “Vodafone admits defeat” is not a headline you read too often.

The situation in India is completely different. Vodafone is paying to acquire 2% of the existing customer base in one of the world’s largest markets and thus gambling on its tremendous potential, albeit from the tiniest of starting points.

It’s interesting to reflect on whether the two deals represent opposite sides of the same coin. Has Vodafone decided to exit mature markets where it is unable to see future growth, in favour of investing in developing markets where the potential for growth is still clear?

If Vodafone chooses to realign its business on that basis, we are standing on the verge of major upheaval in the world’s cellular market and a dramatically different-looking Vodafone at the end of it all. Even if Vodafone does not take this strategy to its logical and most extreme conclusion, it points to further changes ahead as the company manages its portfolio of assets.
Jim Chalmers