European telecommunication giant Vodafone Group (VOD) and Polish operator Polkomtel jointly announced that they have entered into a new partnership that will allow Vodafone to improve its services in Eastern Europe.
The non-equity partnership agreement will be beneficial for Vodafone’s multinational customers as Poland will be added to their existing contracts for international services. This will raise the company’s Partner Market agreement in the region to seven countries.
Vodafone’s Partner Market is a program in which the company enters into a partnership with a local mobile carrier in a country, where the group doesn’t have any exposure. Under the program, Vodafone cooperates with its partner to market certain products and services, which are often developed jointly.
Polkomtel will benefit from collaborating with a big company like Vodafone and will be able to offer more than its competitors to its business and retail customers. Polkomtel, which operates under the brand ‘Plus’ in Poland, has a customer base of over 14 million.
Notably, Vodafone was a minority shareholder of Polkomtel. However, in an attempt to realize the value of its non-controlled assets, the company sold its entire 24.4% stake in Polkomtel, in 2011.
In the recently concluded quarter, Vodafone declared weak financial results where consolidated revenues declined 1.8%, mainly based on lower revenues from European operations.
Before the deal, Vodafone had partner agreements with six different nations while they have operations in only four European countries. We believe that this is a strategic move by the company to enhance its presence in Eastern Europe, without any major investments as the company will be offering its services via the local partner’s network.
Vodafone currently carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Some other stocks in the European telecommunication industry are Telecom Italia S.P.A (TI), Liberty Global Inc. (LBTYA) and Telefonica SA (TEF). Liberty and Telecom Italia currently has a Zacks Rank #2 (Buy) while Telefonica currently carry a Zacks Rank #3 (Hold).
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