VODAFONE, NOKIA DEALS - MARKS CONSOLIDATION AND CONVERGENCE
By Ruma Dubey
Two major global deals have happened, back-to-back in the telecom sector. First was Verizon Communications which yesterday agreed to pay $130 billion to buy Vodafone Group out of its U.S. wireless business. Under the terms, Vodafone will get $58.9 billion in cash, $60.2 billion in Verizon stock, and an additional $11 billion from smaller transactions in a deal that is due to close in the first quarter of next year.
Today, the a deal was truck between Microsoft and Nokia wherein Microsoft will be buying Nokia Oyj's phone business and license its patents for 5.44 billion euros, making it Microspft’s boldest foray yet into mobile devices. This was a deal which was very much on the cards, right since the time, when last year, for the first time a non-Finnish CEO was placed at the helm to bring back the company from the brink - Stephen Elop, who earlier was at Microsoft. And the moment he took over, he did what American companies do the best – fire people to cut costs. He showed the exit door to 40,000 employees world over the same year and to over 3700 employees in Finland. Another 10,000 employees were fired recently. Nokia has, since over a year now, been dismantling its operations in Finland and moving to low cost countries like Brazil, China, South Korea and Mexico. And since then, many in Finland have been calling it the beginning of the end for Nokia and almost everyone felt that eventually Nokia could be bought over by Microsoft.
This deal of Nokia marks the exit of literally a legendary brand and many in Finland would be emotional today. Yes, it was something which was sure to have happened but for many, Nokia is something they grew up with. Finland was jokingly known as Nokia-land. You visited the country and almost everyone around you was to be working for Nokia. But thanks to Samsung and apple, Nokia was literally decimated, speedily losing market share and brand equity.
In October 2012, the almost historical plant in the small town of Salo in Finland which was Nokia’s oldest plant since the company entered the cellphone business was shut down. Over 1000 employees were rendered jobless and the town fell, literally into an abyss. In 2007, 10% of Salo’s population was employed by Nokia. Tax collection in the town has fallen down 75%. In 2010, which was Salo’s best year, tax collection was around $76 million and this year, it is expected to come down to around $ 10 million. And maybe this deal with Microsoft might actually help save jobs, rather than dunking into oblivion if it had stuck around alone.
Today, we are at an intersection where internet technology has converged with mobile technology. And this convergence has shrunk the world, flattened it. This mass adoption of connected digital technologies and applications by consumers, enterprises and Governments is the revolutionary movement of digitization, which has completely changed the face of the telecom sector.
As per the Concise Oxford English Dictionary, the term Converge means “come together from different directions so as eventually to meet”. But today, it is used to denote almost all aspects of the impact of the IT/telecom revolution - digitalization of analogue media; the use of IT in telecom; networking of hitherto separate computers; cable TV; internet usage; online banking; etc.
If earlier the telcos had to look at competition from only peer telecom operating companies, today it encompasses almost all ICT companies. For eg: for Commerce it is competing with e-bay, Group-on, Google; for Payments with Paypal, Visa; for User profile with Microsoft, Apple, Twitter, Facebook; Cloud services with Amazon, Cisco, Salesforce; Health with Microsoft and health care service providers. Applications will only grow and telecom operators could face competition from anywhere. And this convergence and consolidation which we have seen in these two days, will be the texture of the telecom industry in the future.