Vodafone: A “Total Communications” Company?

The Times recently interviewed Arun Sarin, CEO of Vodafone. The Newbury empire once held ambitions of global hegemony as the biggest, baddest vertically integrated telco of them all. In a more pragmatic era, they’ve been working on getting the basics of business right, with their own glasnost and perestroika programmes to re-invigorate the mobile operator model.

Sarin’s remarks are consistent with the strategic move Vodafone is making into a new phase of its business. In the last year or so they have moved away from being simply a really big mobile network operator. He says he wants Vodafone to become a “total communications company”. In pursuit of this, they’ve been investing in fixed-line DSL and PSTN activities, either as a reseller (as in the UK) or by buying up assets (as with the acquisition of Tele2), or just by integrating more closely with their once forgotten fixed assets (as with Arcor in Germany).

There’s a clear Telco 2.0 angle here; a key point in Telco 2.0 analysis is that the connectivity is no longer special. Rather, it is becoming a commodity — something easily purchased on the open market by any entrant for a predictable price. Further, its tight coupling with other parts of the value chain is melting away. Therefore, the distinctions between mobile and fixed operators, between networks and virtual network operators, and between telcos or ISPs, content providers, IT service providers, and consumer electronics firms are increasingly irrelevant.

What now matters is the assembly of elements from the horizontalised soup into attractive propositions to customers. As we said about France Telecom, this may mean that integrated fixed-mobile telcos have more life in them than you might think. (Our current Survey will help to clarify that point anyway).

Sarin spoke of “mobile plus”, and pointedly mentioned that the company is getting into mobile advertising but would not become a content producer. Could this perhaps signal that Vodafone — traditionally the most telcoish of mobile operators — is thinking of a platform strategy?

It’s also worth noting that Sarin was so keen to show off an HSDPA USB modem as the interview’s shiny gadget; connectivity may no longer be special, but networks that don’t keep up with the bandwidth race will certainly lose competitiveness. (Unlike 3UK, whose own HSDPA modem offer modestly claims 2.8Mbits/s, Vodafone is claiming the full Class 5 3.6Mbits/s.)

Note that Sarin said Vodafone was not pushing its DSL reseller activities in the UK very hard because being an ISP in Britain is unprofitable. Bandwidth will be abundant and cheap; therefore its provision will not be especially profitable, and something else must be done to make the telco a viable business — such as “new ways of positioning”.

Given we’ve covered platform and pipe, what about the product? This could be the severest test. With their policy of supporting three mobile operating systems (Linux, Symbian S60/UIQ, and Windows Mobile) they should be able to find plenty of compelling gadgets to hawk. He rejects the iPhone because, even if 1m handsets flew off AT&T’s shelves in 9 weeks this summer in the US, it is only 2G. It is probably right to reject Apple’s shiny gemstone (especially as Apple always offers partners the poisoned red side of the fruit).

However, a better response might be “we’ve got a far better plan to deliver a great communications experience to our users”. Without the service side innovation, device and application makers will simply “bypass the operator”. If in twelve months from now Vodafone are still only selling voicemail products with the 1980s GSM user interface, ‘total communications’ could become total disaster.

Is it too soon to welcome Arun Sarin aboard the Telco 2.0 train?