By Kate Holton
BARCELONA, Feb 25 (Reuters) - British mobile operator Vodafone said it did not need to sell part of its stake in its highly profitable Verizon Wireless joint venture in the United States to bolster its business in Europe.
Chief executive Vittorio Colao told reporters on Monday Vodafone had a healthy balance sheet and could invest when it needed to, adding it could step up its range of services without having to make acquisitions.
“The two things are not totally linked,” Colao said, on the sidelines of the Mobile World Congress when asked about the need to sell down the Verizon stake which contributed over half Vodafone’s adjusted first-half operating profit. “If it is right to make some investments, we will make some investments.”
Facing falling revenue in its core European markets from economic pressures and fierce competition, Vodafone has come under pressure to cut its 45 percent stake in Verizon to fund the purchase of fixed-line assets to increase its product range.
Vodafone has hired Goldman Sachs to advise on a possible 10 billion euro ($13 billion) bid for German cable operator Kabel Deutschland, a source with direct knowledge of the matter has told Reuters.
It has been linked with deals in Spain to consolidate a market which has been hit hard by the economic downturn, with consumers cutting back on making calls and sending texts.
Vodafone has also been struggling in Italy where Colao, an Italian, said he had seen consumer confidence fall even further since October because of political uncertainty as it awaits the results of an election.
Sector bankers and analysts said Vodafone needs to acquire fixed assets to fight off challenges from low-cost mobile players and telecoms and cable rivals pushing discounted, all-inclusive mobile and fixed bundles.
Buying its own fixed assets, such as local cable operators or alternative telecoms providers, would help Vodafone keep up with competitors’ offers and cut fees paid for fixed access.
It could then also offer so-called quad play services which includes fixed, mobile, broadband and TV services, and which help to increase revenues and customer loyalty.
Colao said he would like to offer an array of services across Europe and he could do this either through acquiring assets or renting fixed lines from incumbent operators.
Europe’s largest operators have complained since the financial crisis hit that there were too many players in each national market, resulting in fierce competition and low prices, that hamper their ability to invest in faster networks.
While European regulators recently allowed the cut-throat Austrian market to move to three players from four, Colao said he was unsure whether this indicated a change of strategy.
“It is good that it was approved but the undertakings that were forced upon them, again indicates a bipolar mentality,” he said, adding there was pent-up demand across the region for consolidation.