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Vodafone Set to Exit Belgium: Sells Interest in Proximus to Belgacom| August 25, 2006 | Wireless Services - Europe | Competitive Update | Client Access Analyst: Emma Mohr-McClune
On August 25th Vodafone announced that it has agreed to sell its 25% interest in Proximus to Belgacom for a consideration of EUR 2.0 billion in cash. Belgacom currently owns 75% of Proximus. Vodafone and Proximus have further signed a revised, long-term Partner Network Agreement in Belgium with an initial five-year term. This will enable Proximus and Vodafone customers to continue to benefit from Vodafone’s global products and services, such as Vodafone live!, Mobile Connect and BlackBerry services. Analytical Summary • Current Perspective: Positive on the planned sale of Vodafone’s 25% stake in Proximus to Belgacom, as a beneficial development for all three players. This move is in line with Vodafone’s new strategy to rid itself of minority-held and less profitable assets, in order to concentrate resources on high performance and emerging markets. Allowing Belgacom to take full control of its mobile unit holds promise of an acceleration in new integrated and bundled service development – an area in which Proximus is starting to feel the competitive pinch. • Vendor Importance: High to Proximus, as this sale represents an appropriate antidote to contemporary competitive challenges. Vodafone’s influence in shaping Proximus’ pure-mobile services portfolio has been invaluable over the past five years, but this relationship is of little value in helping Proximus offset gathering competitive challenges, from multi-play cable, fixed-and-mobile and MVNO players. • Market Impact: Moderate on the Belgium consumer services market, as this sale represents an important milestone in Belgacom’s ambitions to streamline its service arms and press ahead with innovative service bundling and integration, although the short-term impact on the Proximus portfolio will be negligible. A new integrated portfolio and service strategy will necessarily take time to develop and trickle through the regulator-monitored pipeline. Recommended Competitor Actions • Competitors should not anticipate a major short-term impact leading on from this announcement. The sale could still take several weeks to validate, and Proximus is unlikely to undergo a radical realignment of its consumer portfolio in the next quarter. In particular, competitors should be aware that Proximus will continue provisioning key Vodafone-branded services and solutions under a new long-term Partner Network Agreement. • Mobistar should boost sales and marketing activities for its consumer ADSL performance – recent performance indicators have been very disappointing (just 10,000 DSL subscribers by June 2006), and Belgacom will certainly seek to exploit this weakness. • Mobistar should seek to make good on its success with Tempo Music, using this as a platform for a whole new value-added service and promotional strategy for young users with a music interest. • BASE has demonstrated little consumer service innovation lately, and needs to ramp up promotional activity in the next quarter leading up to the all-important holiday market. Wireless Services - Europe
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