Communications Restructuring Heats European Winter and Verizon on the Horizon

By Peter Bernstein January 22, 2014

For those readers who like to follow my commentary on various topics of the day, along with a heartfelt thank you, I wanted to share my self-awareness of a desire to say, “I told you so!” We are barely three weeks into 2014, and several of my predictions for the year ranging from security problems to net neutrality issues have already come to pass. 

If you remember, I also voiced an opinion that 2014 was going to be a robust year for industry restructuring with convergence being a major driver especially as service providers around the world, but particularly in Europe looked to fill in broadband footprint and content gaps. Yes, this too has come to pass as well.  News, as we say in the U.S. “from across the pond, in just the past few days is reflective of the intense level of jockeying going on.

Viva La France!

It is getting to the point in Europe where keeping track of the machinations of all the various players is becoming something for IBM’s Watson supercomputer to mull.  As noted, I believe this is being driven by the need major players feel to assure their customers do not have to experience competitors’ networks or services.  Triple play now appears to be table stakes, but quadruple play— Internet, mobile, phone and video content (TV, cable and on-demand) —soon will be when the music stops and everyone has to take a seat.  

The big news at the moment is in France. Reports are flying that Vivendi is getting close on its sale of SFR to Numericable, the French cable television operator owned by Altice. This is going on even as SFR, France’s second largest mobile operator (2012 revenues of US$ 15.3 billion, 21.2 million wireless customers and 5.2 million broadband subscribers, and with a current market value of roughly US$ 16 billion) is proceeding with IPO plans. 

The reason you need a scorecard to keep up with the players on this one is that Numericable, which had 1.7 million broadband customers at the end of September 2013, held its own IPO in November of last year.  Plus, its major investor Altice is also looking to the IPO route as a means to expand its cable footprint.  All media conglomerate Vivendi wants to do is cash out of a business that is not considered core to its strategy going forward. 

Things are heating up across Europe

It is not just France where things have gotten exciting.  Liberty Global Plc  is in the process of completing its acquisition of Dutch service provider Ziggo, Spanish cable operator Grupo Corporativo ONO SA is rumored to be looking to go IPO, and Vodafone is back on the front burner as a hunter rather than a grand stander.  In fact, pick your favorite EU country and the likelihood is that the network services industry (wired, cable and fixed and mobile wireless) is in a state of flux. It is clear that broadband is critical to a Pan-European economic revival and the rush is on to ensure a place at the table.

Verizon over the horizon 

Keeping with the theme that quadruple play is the path forward, or at least that being able to offer customers a ubiquitous broadband experience with enough content options so they will wish to leverage rather than leave your service “E”vironment, back on this side of the pond the acquisition of Intel Media by Verizon is indicative of the trend. 

Verizon will purchase intellectual property rights and other assets that enable Intel's OnCue Cloud TV platform. The goal is video everywhere.  The worlds of Verizon CEO Lowell McAdam spell it out: "The OnCue platform and team will help Verizon bring next-generation video services to audiences who increasingly expect to view content when, where and how they want it. Verizon already has extensive video content relationships, fixed and wireless delivery networks, and customer relationships in both the home and on mobile. This transaction provides us with the capabilities to build a powerful, capitally efficient engine for future growth and innovation. We will have the opportunity to enhance, expand, accelerate and integrate our delivery of video products and services to better serve audiences on a wide array of devices."

Everywhere means everywhere. It is why what is going on in Europe in terms of the dynamism of the restructuring of industry assets is a portent of things to come this year around the world.  It is not just Verizon on the horizon, it is any major service provider looking for expanded reach as well as the building of a business model that can fend off OTT attempts at market hegemony. 

As the old #1 TV soap opera in the U.S. used to end, “Tune in next time for As the World Turns!”

Edited by Cassandra Tucker
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