Vodafone would aim to become an investor in Openreach, currently BT's access networks business, if it were spun off as an entirely separate company, CEO Vittorio Colao told analysts during an earnings call earlier today.
The remarks came several months after Colao said the structural separation of BT Group plc (NYSE: BT; London: BTA) might spur Vodafone Group plc (NYSE: VOD) to become a fiber investor in a "modern infrastructure company" and were accompanied by further criticism of BT's current position following its recent takeover of mobile giant EE . (See BT Split Could Spur Vodafone to Invest in Fiber – Colao and BT Restructures, Boasts Best Quarter in 7 Years.)
"It was obvious in BT's presentation that it's very profitable and being loaded with opportunities to improve the BT ownership of it," Colao told analysts. "If Openreach were to be spun off we would consider being an investor in it -- if not we are expecting tougher pricing and access conditions and service obligations coming from the review."
Colao was alluding to a strategic review of the communications sector currently being carried out by Ofcom , the UK telecom regulator, which has previously indicated it may force BT Group plc (NYSE: BT; London: BTA) to spin off the Openreach business to improve competition. (See Ofcom Does Not Rule Out BT Carve-Up and Ofcom Could Still Make BT Do Splits.)
Although mobile consolidation could lead to an improvement in operating conditions, a merged 3 and O2 would have a role in two separate network-sharing ventures as things stand.
Through a joint venture called Mobile Broadband Network Limited (MBNL), 3 currently shares network infrastructure with BT/EE, while O2 has a similar arrangement with Vodafone through the Cornerstone Telecommunications Infrastructure (CTI) business.
Colao appears worried that if 3/O2 quits CTI rather than MBNL, Vodafone will be left without infrastructure partners while BT/EE and 3/O2 collaborate on network rollout.
"We are in favor of consolidation as long as it does not allow 3 to sit on two different networks and look at two different strategic plans, which has antitrust aspects that I'm sure would concern the regulator," he said. "As long as those conditions are met we are supportive -- but if the result is that BT/EE is strengthened or sits on both tables we will not be happy."
Colao's comments on 3/O2 came shortly after 3 chairman Canning Fok had promised to make several big concessions to secure regulatory approval for a £10.25 billion ($15 billion) takeover of O2 by Hutchison Whampoa Ltd. (Hong Kong: 0013; Pink Sheets: HUWHY), 3's Hong Kong-based owner. (See Hutchison Offers Major Concessions to Seal 3/O2 Deal and Telefónica Seals $15.2B O2 Sale to Hutchison.)
Those included commitments to increase investments, not raise prices and offer better conditions for wholesale customers, but included nothing about network-sharing arrangements.
In a trading update published on Thursday morning, Vodafone today claimed to have enjoyed its sixth consecutive quarter of organic growth in service revenue, the figure rising by 1.4% in the October-to-December quarter compared with the year-earlier quarter.
Reported revenues fell by 5.5%, however, to about £10.3 billion ($15.1 billion), due largely to unfavorable foreign exchange movements.
Vodafone claimed to have witnessed a continued recovery in Europe, where service revenues shrank by just 0.6%, and momentum in Africa, the Middle East and Asia, where they grew by 6.5%.
Vodafone's share price was trading 0.5% down on the London Stock Exchange this morning following the trading update.
— Iain Morris, , News Editor, Light Reading