83-Consolidation as Growth Slows
Recently, Vodafone and Hutchison Whampoa announced that they will combine their Australian mobile telecommunications businesses into a joint venture. Currently, Vodafone is the third ranked competitor in the Australian market, while Hutchison is the fourth. The combined subscribers of the new firm will still rank third in the market, but a relatively strong third.
This is a pattern common to an industry as its high growth begins to slow. Once an industry begins to slow down, the top competitors in the industry are usually capable players. These top competitors are unlikely, and unwilling, to cede share willingly to another competitor. In that situation, growth and market share is likely to come by way of consolidations, such as this one, or acquisitions.
A very important determinant of the success of these consolidations is whether the new company can retain all of the customers the two firms previously owned. (See the Perspectives, “Buying Share, Not Sand” and “Acquisitions: The Buy or Win Decision” on StrategyStreet.com.)
Both Vodafone and Hutchison remain successful and strong competitors in the worldwide mobile communications market.
Vodafone Hutchison Australia holds 17% of the Australian mobile handset services market, the number 3 position. Telstra leads the market with a 44% share followed by Optus with a 31% share.
In September 2013 Vodafone announced the sale of its 45% stake in Verizon wireless to Verizon Communications. It operates across more than 30 countries worldwide. Its market share runs in the low 30s in Germany and Italy in the 20s in UK and India and in the mid-teens in Spain. In 2021 Vodafone had roughly $26 billion in mobile revenues. In the same year, Verizon had total wireless service revenue of about $18 billion. Verizon had the 2nd largest wireless subscription US market share in 2021 with 29% of the market. AT&T was the leader in that market with roughly 45% of the market.
CK Hutchison holdings Limited is a Hong Kong-based and Cayman Islands registered multinational conglomerate corporation. It was formed in 2015 through the merger of Cheung Kong Holdings and Hutchison Whampoa. It has 4 core businesses: ports and related services; retail; infrastructure; and telecommunications. CK Hutchison remains a leading global operator of mobile telecommunications and data services, serving over 100 million customers around the world. Their telecommunication business, 3 Group Europe, serve customers in the UK, Italy, Sweden, Denmark, Austria and Ireland. The company had total telecommunications revenue of about $16 billion in 2021.
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