Business

What’s going on with Vodafone and Vocus?

Business journalists get a (small) frisson of excitement when there’s a hint of a big deal.

“Join us for an important announcement from Vodafone and Vocus”, said an email on Friday morning. “Vocus CEO Mark Callander and Vodafone CEO Russell Stanners are holding a joint press conference on Tuesday at 10am.”

The first reaction was “Ooh, a buyout.” Vocus NZ, the country’s fourth-largest telecommunications company, was put up for sale last October by its Australian owners, and both Spark and Vodafone have expressed an interest, tempered lately by advice that the Commerce Commission likely wouldn’t agree to a deal, on competition grounds.

Another factor mitigating against it being a takeover announcement is stock exchange requirements. Vocus is listed on the ASX and rules around continuous disclosure mean companies have to declare ‘material’ information as soon as they know about it. They can’t sit on it over a Queen’s birthday weekend.

Vocus selling its NZ arm would likely count as material.

The next possibility, still a significant one for the industry and particularly for consumers, is that Vodafone and Vocus could announce a mobile virtual network operator (MVNO) deal. MVNOs are when one company offers mobile services to customers by piggybacking off a different company’s network.

British supermarket giant Tesco and multinational Virgin have MVNO deals with mobile provider O2, allowing them to offer handset + mobile contract bargains without a single kilometre of network.

Vocus, which owns the Slingshot, Orcon and CallPlus brands (among others) and has around 200,000 broadband customers in New Zealand, already has a MVNO deal - with Spark. But that deal only allows it to on-sell Spark’s plans (it’s called a “thin” MVNO). This means Vocus can offer mobile packages to customers that want an all-in-one deal, but it can’t be innovative with its own packages.

Vocus would prefer a “thick” MVNO, where it buys a big tranche of mobile calling and then puts together its own deals.

If Craig Young, CEO of the Telecommunications Users Association (Tuanz), was a betting man, he would be putting his money on Tuesday’s announcement being some sort of thick mobile virtual network deal.

If so, that would be good for consumers, he says, because it would bring more competition - and hopefully more innovation - into mobile.

“New Zealand is really a three-player market [Spark, Vodafone and 2Degrees], and unlike some other countries we don’t have strong MVNO space. We’ve argued strongly that three is the smallest number of operators that’s good for consumers; international research shows for true competition you want three-four strong providers, plus other operators.”

Of course, it could be something quite different - some sort of smaller deal or alliance that doesn’t involve the two parties jumping into bed with each other, but does make them excited enough to call a media conference.

Or it could be something totally dull.

As Vodafone says, we'll just have to wait and see.