Vodafone will buy Irish mobile operator Eircell for E4.5 billion.
Irish incumbent telecoms operator Eircom today announced that it would sell its Eircell mobile business to Vodafone, the world’s largest mobile operator, for E4.5 billion. The sale had been expected for several months as the two companies negotiated terms. Eircell will be demerged from Eircom in early 2001, and then immediately sold to Vodafone.
The move follows Vodafone’s recent acquisition of 15% of Japan Telecom and fits in well with the company’s current strategy of using its high share price to fund as many acquisitions as possible to cement its global portfolio. The company wants to ensure it has a presence in as many major markets as possible. As Vodafone had no previous operations in Ireland, purchasing Eircell fits in well.
Vodafone has been able to build out its wireless networks with great success. It now owns majority or minority stakes in several networks across the world, all of which have disparate brands. But this could be a problem. The focus of competition in mobile telecoms will switch from price and network quality to content provision and brand image, as exemplified by the rise in virtual mobile operators such as Virgin, which will not even deploy its own wireless infrastructure. Especially as switching operators will become easier, Vodafone could run into problems in retaining customers.
The company aims to put the Vodafone identity on all its brands, at first by renaming them to hybrids such as ‘Eircell Vodafone’ and then eventually abandoning the domestic operator’s name. But this risks sacrificing these brands’ goodwill. And in comparison to France Telecom’s Orange brand, which is following the same strategy, Vodafone certainly comes across as weaker in brand terms. Whilst Orange is seen as a first-mover in innovation and quirkiness as personified by former CEO Hans Snook, Vodafone is ‘just’ a mobile telecoms operator.
Vodafone has strong mindshare and identity in the UK, but imposing the brand globally will require an innovative and expensive marketing strategy. Branding will be the company’s major challenge over the next few years.
