Vodafone will dictate pace of change in future of the telecoms industry

Vodafone AirTouch is the largest mobile telecommunications company in the world and claims to be one of the top 10 businesses globally by market capitalisation. It is worth £155 billion sterling (€258 billion) and has 59 million customers in 25 markets. Eircell, by comparison, is worth €4 billion and has just over one million subscribers.

The company was set up in 1982 by Racal Radio Group, a British defence contractor, and it successfully bid for the first private British mobile licence. The Vodafone network carried its first call on January 1st, 1985, from St Katherine's Dock in London to Newbury, the company's headquarters in Berkshire.

The group grew to be the dominant player in the British mobile market with five million customers and acquired interests in mobile networks in other countries including New Zealand and Eygpt.

Vodafone, whose chief executive is Mr Chris Gent, only became the dominant global player in the last two years as a result of two mega-mergers. The first was in June 1999 when it merged with Air Touch Communications, the US mobile company in a €57 billion deal. Later that year, in September, it merged its US business with the mobile division of Bell Atlantic, another US phone company, to create a single business with a national footprint in US.

This year saw a €188 billion merger with Mannesmann, the German telecoms giant, through which Mannesmann shareholders ended up with 49.5 per cent of the enlarged group.

The company has operations in the Netherlands, Greece, Australia, Sweden, Hungary, Portugal, Japan, India and many other countries.

As a result of the merger, Vodafone has telecoms interests in 14 European countries and boasts more than 32 million customers in the region alone.

Europe remains the single most important region for the business.

The incorporation of Eircell into the Vodafone AirTouch network has the capacity to deliver significant benefits for Eircell customers. As the world's largest mobile phone company, Vodafone AirTouch will dictate the pace of change in the industry over the next few years.

Provided it makes financial sense in the relatively small Irish market, the link with Vodafone should ensure Eircell remains at the forefront in introducing advanced mobile phone based services at competitive rates.

This advantage should really come into play when the third generation of mobile phones becomes available next year. A more immediate benefit should be lower costs for Eircell customers who use their phones abroad, assuming they can avail of a Vodafone network and that, once again, it makes financial sense for Vodafone from a group perspective.

Its exponential growth in the last two years means Vodafone AirTouch faces a huge challenge in the next few years integrating its various businesses across the globe. Eircom executives maintain that the international giant is keen to acquire their mobile business, but the Irish company will be only a small part of a massive business. Yesterday, it was reported Vodafone was close to the completion of an €11 billion sale of Infostrada, the second largest phone company in Italy, which was acquired as part of the Mannesmann deal.

That Vodafone considers an €11 billion phone business as peripheral says something about how it views a €4 billion mobile company in a small market. The Mannesmann deal has already presented some regulatory headaches for the company and it has been forced to dispose of a number of businesses by the European Commission. These include Orange, another British mobile group.

In the immediate future, Vodafone AirTouch looks set to ride the positive sentiment emerging in the stock market towards telecommunications companies that are focused on one sector, be it mobile, Internet or fixed line.

This trend runs counter to the arguments traditionally put forward by telecommunication company executives as recently as a few weeks ago, but it remains to be seen if Vodafone AirTouch will go the distance.