Vodafone must decide on Verizon venture One of the unavoidable consequences of establishing impressive corporate scale is that the strategic choices that follow become frighteningly large. Take BP. Earlier this week it swapped its holding in the fabulously profitable but managerially fraught TNK-BP venture in Russia for a near 20 per cent holding in a Russian state-controlled oil entity, Rosneft, along with about $12bn in cash. In very rough terms, BP has enjoyed - and is now crystallising - a total return of close to $50bn on the original $8bn invested by former chief executive Lord Browne nine years ago. Is this a smart decision by Bob Dudley, the incumbent running BP? Time will tell, of course, but either way this has been a make or break decision involving quite literally scores of billions of dollars. Coincidentally, a similar decision faces the chief executive of another leading British company, Vodafone's Vittorio Colao - albeit a choice facing West rather than East. He needs to decide whether Vodafone stays in its US wireless venture with America's Verizon, or whether it takes a step back and employs its capital elsewhere. As with the creation of TNK-BP in 2003, the decision to establish a new mobile telephony company between Vodafone and what was then Bell Atlantic back in 1999 was a brave and visionary step. Verizon Wireless has proved to be strategically astute (in a defensive sense) and it also has shown itself to be highly profitable, even if it has proved difficult to turn those profits into hard cash. But, like TNK-BP, this mobile marriage between Vodafone and what is now America's Verizon Communications has also been a management nightmare for Mr Colao and his predecessors at the British company, Sir Chris Gent and Arun Sarin. While BP's Mr Dudley has had to grapple with Russian oligarchs playing Kremlin-grade politics, the power tussle over these US mobile assets has proved more prosaic: the ownership split is 55 per cent Verizon, 45 per cent Vodafone. So whether it's the choice of technical standards, the distribution of dividends, or pretty much anything else, Verizon calls the shots. The reasons Mr Colao and his colleagues might now want to back out of this venture are mounting by the week. On the competition front, we had news earlier this month that T-Mobile wants to buy the second tier US mobile operator MetroPCS, quickly followed by news that SoftBank of Japan is shelling out $20bn for 70 per cent of Sprint Nextel, the third largest American mobile carrier. Verizon Wireless might be the sector leader in the US, but it will now have to sweat to stay in front. There is also the matter of divergent share prices: while Verizon has traded at record highs recently, Vodafone stock has essentially moved sideways for years. So there's an apparent valuation mismatch here of which Mr Colao might take advantage. Robin Bienenstock of Bernstein, a closely watched sector analyst, is certainly encouraging Vodafone to make a move. As she told clients in a recent note: "With Verizon trading at all-time high multiples; US investors appearing to suspend disbelief on the impending deterioration of the US wireless market; and an urgent need for major strategic change in Europe, there may never be a better time for Vodafone to relinquish its 45 per cent of VZW." The European issues are a mobile price war in Italy, 4G spectrum battles in the UK, and some real stress in the Spanish market, but Ms Bienenstock sees dark clouds across Vodafone's horizon: "We think changes to technology and regulation, and the lack of changes to market structure will further weaken wireless revenues . . . Two - three years hence Vodafone risks being left a high-cost largely wireless operator competing in a declining segment against very low-cost local players. Whether or not Mr Colao now resolves Vodafone's awkward relationship with Verizon, he will be aware that current circumstances could be very different indeed. Five years ago Vodafone considered an extraordinary plan to pay $160bn to take over Verizon in its entirety. It was called Project Vulture and it didn't get past the planning stage. And it's one crucial strategic call that doesn't get discussed any more.