What now for Vodafone?

I have a slightly different take on Vodafone's woes. There's a lot of discussion about its talks about exiting its Japanese operation and how this "signals the end of Voda's global ambitions". Unsurprisingly, the continued telecom M&A in the US has also raised the question its Verizon Wireless stake as well.

I think the underlying problem - and possible solution - runs much deeper than whether Arun Sarin's board and executive appointments have been right or wrong.

Most commentators have pitched this as a management issue. I think they're wrong - it's actually a technology issue. The issue for me is that the company shows every sign of having missed the IP boat, and, importantly, how this is changing the fixed telecom world faster than the mobile world.

The pivot point: the ending of the bubble in 2001 left an overcapacity of fibre, not spectrum.

All of the world's most developed mobile markets have adopted ever more sophisticated fixed networks, as well as mobile. Japan and, especially, Korea epitomise this, with 100Mb home broadband and a myriad of compelling services, as well advanced handsets and 3G. Customers want both. It now appears that the France, Scandinavia, the UK and the US are starting to head the same way, with Germany and Italy not far behind.

In other words, in all of Voda's top geographies, a standalone mobile story is looking increasingly shaky, unless it is addressing a particular niche, such as low-cost voice. For a market leader, it's looking completely untenable. It's the equivalent of a modern-day Ford telling its global customer base that they can have any colour they want..... as long as it's black.

Voda has two options, in my view:

- get serious about FMC, if it intends to be remain a player in its core markets
- expand in emerging markets where fixed networks are of little concern

The best way of doing this would be to sell some of its "marginal" businesses - especially ones where its technology story is weak (Japan) or fundamentally different (CDMA with Verizon Wireless) - and reinvest the funds in one or both of the previous options. (There's also a third option, to invest much more in content and media companies, although I think this would be barking mad for a variety of reasons).

I think the latter one is pretty much a no-brainer - I definitely expect to see more Voda presence in Asia, Africa, and South America over time. If it can somehow get a foothold in China, so much the better. I can't see there being much debate about the merits of this strategy.

But on FMC, I wonder if they company has reached any measure of internal agreement, or whether it's still in ostrich mode.

As an example, I've just noticed something - the group cannot even decide whether it wants a SIM card as its logo any more. In the UK and Germany, the logo is still SIM-shaped. But in Italy, Ireland, Netherlands and at Group level, the cut-off corner has disappeared - even from the downloadable logos section on the Press section of the site.

Personally, I think that it should take some of the $50bn+ it might get from selling its Japan and US businesses and buy some fixed operators. Given the flurry of interest around private equity investors allegedly eyeing it up, I'm surprised few observers have considered how well BT would fit into the Newbury fold.

Of course, Vodafone already has a fixed business, in Germany, where it has a 74% stake in Arcor. Not that you'd know it - there precious little on either company's site to indicate the relationship exists, while Vodafone Germany's new ZuHause "HomeZone" service uses (ironically) BT's fixed network in the background. Contrast this with O2 and new parent Telefonica which, according to discussions I've had, are already cross-selling and bundling mobile and ADSL services in Germany.

Sooner or later Voda is going to have to get serious about copper and fibre. Otherwise, it will be stuck as a "legacy mobile operator" and its growth confined to emerging markets.