International Business: Mergers
Chris Gent, King of the Web?
His risky strategy: Trying to rule Europe's Net through mobile phones
The taunts started two months ago, right after Vodafone Chairman Chris Gent launched his $163 billion takeover bid for telecom rival Mannesmann. In full-page ads, Mannesmann ridiculed Vodafone AirTouch PLC, its unwelcome suitor, as a neophyte on the Net. The German company, with its own established wired-line Internet service, contrasted its Net "experts" with the British "novices."
Mannesmann's taunts stung. After all, the biggest prize is not Europe's phone market but mastery of the European Internet. And the next rush in Europe will be to access the Net through mobile phones. When Chris Gent began the fight for Mannesmann on Nov. 14, Vodafone was already the world's largest mobile-phone company. But it had only an embryonic Net business. Since then, Gent has rounded up a glittering cast of Net partners, including IBM. And on Jan. 30, he announced a tie-up with France's Vivendi. That deprives Mannesmann of a potential ally in the takeover war, virtually ensuring that Vodafone will triumph by Feb. 7, the day Mannesmann shareholders are set to vote on Gent's bid. It also gives Vodafone more pieces for its Net offerings, from French content to links with digital TV.
Now, Gent must fulfill his promise to turn Vodafone-Mannesmann into a titan of the Web. If he pulls it off, Vodafone could provide Europe with its first global Net powerhouse, a force to thunder onto the same cyberstage as American powerhouses Yahoo!, Microsoft, and America Online. And Vodafone would be a pioneer: the first company to build a worldwide Net presence on wireless devices.
Gent's strategy is risky. The technology is in its infancy. Strong European competitors abound, ranging from national powers such as Deutsche Telekom to savvy marketers such as Richard Branson of Virgin Group Ltd. Even manufacturers are getting into the fray. Finland's Nokia is discussing news services with Britain's News Corp., among others.
What's more, the vast potential of the mobile Net has led to a price explosion in the industry. Gent himself is paying an eye-popping $9,000 per customer in his bid for Mannesmann, more than twice what Deutsche Telekom paid for British Carrier One 2 One last fall.PRECIOUS. Vodafone's biggest battle will take place on the tiny screen of the cell phone. This precious real estate, known as the "mobile portal," is what Net surfers will see when they turn on their phones. Practically everyone in the business, from the phone companies to Microsoft and AOL, is eager to control it.
Why? In a tiny mobile Web where Net-surfing is hard, it's the little portal that will steer users to a host of basic services. Whoever owns the portal can make a bundle on advertising and commissions. No wonder Microsoft is working with Ericsson to develop a mobile browser, around which it plans to develop its own portals. And AOL International President Michael Lynton says that a place on the mobile Net is "absolutely essential."
Gent has some short-term advantages over the American Web giants in the race to stake out the most territory on this New Age Net. As a phone company, Vodafone already has a billing relationship with the customer. This can position it as a bank for e-commerce transactions, in which the user puts the charge on the phone bill. Second, phone companies can track customers' movements. In fact, next year, using satellite technology, they will be able to pinpoint a customer's position within 300 feet--and send them electronic coupons, for example, to a nearby restaurant. "That's a big plus over anything AOL can bring to the party," Gent says. He adds that while AOL has knocked phone companies out of the lucrative Internet portal business in the U.S., "we're not going to allow them to do that to us here."SCARED STIFF. Maybe not. Gent, after all, has the global reach to hammer out tough agreements with Web powers, relegating them to the margins of his portal. But Vodafone's rivals, such as Deutsche Telekom's cell-phone service, are not so lucky. They may well be tempted to give Yahoo! or AOL a prominent place. With this, the Americans could extend their mastery to the mobile Web and provide Vodafone with fearsome competition. "That's what scares the phone companies stiff," says one banker.
If Gent picks up Mannesmann, as expected, he solidifies his hold as the mobile-phone king of the world. But it's his battle for the Internet that's likely to keep him working overtime for years. In the end, Chris Gent may well become Europe's first Web titan--but not without a ferocious fight.By Stephen Baker in Paris and Kerry Capell in LondonReturn to top