Vodafone Group formally completed today its €7.7 billion takeover of Kabel Deutschland Holding (KDH), but Robin Bienenstock, a London-based analyst with Sanford C Bernstein, reckons the mobile operator will struggle to realise the intended benefits.
Pointing to what she sees as Vodafone’s poor track record of integrating fixed-line assets with mobile operations, Bienenstock said in a research note that Vodafone’s acquisition of KDH is “likely to prove more disruptive and value destructive than the company hoped”.
“We see the seeds of disaster,” she added. “Consumer experience will be inconsistent, execution expensive and complex and oddly the organisation – with [KDH] looking after all wireline products – suggest that Vodafone has no intention at all of integrating wireline and wireless products.”
Bienenstock seems to imply that back-office integration in Germany might then be limited to Vodafone’s legacy fixed-line copper assets (Arcor) and Kabel’s fibre-optic network.
“Vodafone has handed [KDH] management the unenviable job of uniting and selling all their wireline and TV products,” she said.
Mobile World Live contacted Vodafone for a response, and to clarify its intentions towards fixed and mobile integration in Germany, but received no reply by time of publication.
If Vodafone were to embark on full-scale integration with Kabel Deutschland, Bernstein reckons it could take between 2-3 years to execute if the experience of other European operators of putting integrated fixed and mobile systems in place (such as Telefonica, Portugal Telecom and Deutsche Telekom) is anything to go by.
According to a report from Reuters, Vodafone expects cost-savings from the Kabel deal to exceed €300 million a year by the fourth full-year following completion (although that’s before integration costs).
The mobile operator also sees potential for revenue synergies of €1.5 billion from cross-selling products and improved customer loyalty.
Following the completion of the German deal, Vodafone holds 76.57 per cent of KDH share capital.