Vodafone: The Giant

Vodafone is one of the most recognisable brands, worldwide with many thinking it concentrates on mobile phones, however, Vodafone is a formidable force behind the internet and this post will explain how Vodafone got so big and how it controls many aspects of the internet as we know it.

Racal Electronics plc was a British electronics company, founded in 1950 making radio equipment. It later diversified by offering products including voice and data recorders, tills, laboratory instruments and military electronics, including radio and radar. When mobile telephony became popular in the 1980’s, it co-founded Vodafone (voice data fone) after a growing Swedish conglomerate owned American company, Millicom, Inc, approached Racal Electronics’s head of military radio division to bid on the UK’s second cellular radio licence auction. The two struck a deal giving 80% to Racal Telecom, Millicom holding 15% plus royalties and venture firm Hambros Technology Trust holding 5%.

Vodafone launched on 1 January 1985, with the first unofficial call being made by the son of Vodafone’s chairman Sir Ernest Harrison on New Year’s Eve 1984. He called home to wish his father Happy New Year a few hours before Vodafone’s official first call between St Katherine’s dock in London to Vodafone’s head office in Newbury, which at the time was over a curry house.

The phones at the time were the size of a briefcase, cost about £2,000 and had a battery life of no more than 20 minutes. BT Cellnet also launched a few days later, with its first calls between London Heathrow and BT Tower transmitting on 9th January 1985, costing £1 per minute.

Just under 24 months later on 29 December 1986, Racal Electronics issued shares to the minority shareholders and Vodafone became a fully owned by Racal Telecom. Almost another 2 years passed, On the 26th October 1988, Racal Telecom went public on the London Stock Exchange with 20% of its stock floated. The successful flotation led to a situation where Racal’s stake in Racal Telecom was valued more than the whole of Racal Electronics. Under stock market pressure to realise full value for shareholders, Racal Electronics demerged Racal Telecom on the 16th September 1991, as Vodafone Group.

In the absence of Vodafone, Racal Telecom re-established itself winning a major government contract in 1988 to supply the telecom network for British Rail. This was to compete with its main competitor, Cable and Wireless with Barclays and BP, who formed Mercury Communications, had recently built a figure of eight nationwide fibre optic network alongside railway lines in the early 1980’s, started battling BT by installing their own landlines and launching a mobile phone network in 1993 as one2one.

Racal Telecom later bought out British Rail’s telecom assets in 1995. It was the largest private telecoms network in Britain, consisting of 17,000 route kilometres of fibre optic and copper cable which connected every major city and town in the country and provided links to continental Europe through the Channel Tunnel. It later sold the network for £1bn to Global Crossing in 1999, following by the sale of the rest of Racal to Thomson and later part of Thales plc.

Meanwhile, Vodafone was focused on mobile telephones and spreading around the world, with franchises and collaborations being established everywhere. With mobile use growing and capacity demands exceeding expectations, Vodafone’s focus shifted from mobile phones back to its founding company Racal Telecom’s original game plan, fibre networks.

Looking at their arch nemesis, Cable & Wireless’s Mercury Communications had been busy building a global fibre network throughout the 1990s and into 2000, entering several international markets and at one point, Cable & Wireless was the 3rd largest internet supplier to FTSE350 businesses. Cable & Wireless acquired Energis in August 2005, obtaining a quarter of the market share from the incumbent (BT) and then in 2008, it purchased a stake in Thus plc, aka Scottish Telecom, an offshoot of the energy company Scottish Power. It was a real threat to Vodafone’s new game plan however in a twist of fate in 2009, The bonuses paid to directors became excessive and shortly before the company split into two separately listed companies in 2010, Cable & Wireless suffered one of the biggest shareholder rebellions, when 38% of the shareholders failed to back the company’s pay policy at a fiery meeting.

Cable & Wireless Worldwide was formed in 2010 as a result of the shareholder rebellion. The new outfit specialised in servicing large corporates, governments, carriers and resellers and its services included managed voice, data and IP based services. In 2011, an ex Vodafone director was bought on board and in 2012, Vodafone purchased the company for £1.04 billion, rebranding the network to Vodafone, screwing up wholesale agreements with major brand isp’s and killing it’s popular Demon Internet brand.

This strategic move by Vodafone has created an international beast with fibre optic and mobile networks around the world, leasing their services to many other networks and is by far, one of the biggest internet players in the market place. This level of ownership is a monopoly and could be considered dangerous as many links will pass a Vodafone PoP or Fibre.

With its Indian mobile network taking on AirTel, the growth of Vodafone worldwide isn’t slowing down, as in 2014 news of a deal with Tata Communications will further reduce worldwide fibre/internet carrier competition. It’s been noticed that Tata communication’s chambers are now being maintained by Vodafone’s engineers in the UK, So this might already in the case, we’re not sure if their leasing duct space or acquiring the whole show.

Moral of this story, there’s no escaping their network or worldwide internet involvement. we would love to hear story’s from the past C&W/Vodafone days. Get in touch!


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