Industry comes to terms with Vodafone-Mannesmann merger

Within hours of Mannesmann succumbing to Vodafone AirTouch's record breaking E180bn merger offer, attention turned to what the deal means for the telecoms industry as a whole.

Stocks in telcos such as Colt, Energis and Telewest were boosted as it became clear that the deal was imminent, the thinking being that there will be further consolidation - involving fixed line as well as mobile operators. Telcos that own their own infrastructure are clearly going to be the main targets.

Although Vodafone insisted the merger made sense from a strategic point of view, it was actually the stock market that pushed its shares up to a point where the value of its bid for Mannesmann became too good to refuse.

Just before news of the deal broke, one telecoms lawyer said Mannesmann had already lost the financial, technical and commercial arguments, making a deal inevitable.

But given the industry will behind the merger, some were left asking why it had actually taken so long. In a hastily arranged press conference, Vodafone CEO, Chris Gent, denied that friction between himself and Mannesmann boss, Klaus Esser, had hindered negotiations. Even so, Esser will now leave the group.

With the assumption the deal will now be cleared by regulators and investors, analysts have begun to look at the type of services the combined Vodafone-Mannesmann Group will offer end users.

Most agree that there will be very little effect on the market in the short term. However it does have the potential to usher in common systems around Europe, with the possible harmonisation of prices, straightforward roaming, and transferable value-added services.

Those value-added services are quite likely to emerge from content deals with media giants such as News Corporation. Rupert Murdoch's firm is known to have already held talks with Nokia to explore the possibility of delivering content over next-generation phones. It also has an existing relationship with Vodafone Interactive, leading to inevitable predictions of a three-way partnership, given that Nokia is a major Vodafone supplier.

However, the mobile market moves quickly, and with the merger already a near-certainty, the stock markets thoughts are now turning to the race to snap up Orange, France Telecom and Royal Dutch KPN.