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Mobile giant Vodafone Group Plc is to reorganize into three units covering Europe, emerging markets, and new technology. The shakeup, which will take place at the start of May, comes after a difficult couple of months for the operator and its chief executive Arun Sarin, and is aimed at cutting costs in Vodafones mature markets, increasing profitability in emerging markets, and expanding new technologies.
Just weeks after surviving a boardroom battle and investor unrest, Sarin has also made a number
of management changes. Vodafones principal unit will be Europe, where he has appointed the former head of Vodafone Japan, Bill Morrow.
Morrows role will be to head Vodafones operations in European markets including Germany, Italy, Spain, and the UK (LSE: ATUK.L - news) . Sarins decision to use his top turnaround man for the European division reflects the fact that Vodafone (LSE: VOD.L - news) , like most other European mobile operators, is struggling to retain growth levels in markets that are heavily saturated and fiercely competitive.
Given the high penetration levels and competitive nature of these markets, the unit will focus on leveraging its unique regional scale and reducing costs, Vodafone said. Tim Miles will move from his role as chief executive of Vodafone UK to become chief technology officer. He will be succeeded by Nick Read, currently chief commercial officer in Vodafone UK. In addition, Frank Rovekamp has been appointed chief marketing officer.
The Central Europe, Middle East, Asia Pacific, and Affiliates division will be headed up by Paul Donovan who is currently chief executive of OVS, Other Vodafone Subsidiaries. This unit will contain Vodafones emerging markets and other Vodafone operations.
Vodafone has invested heavily in emerging markets over the past couple of years. In March 2005, it paid $3.5bn in cash for the Romanian mobile phone group Mobifon SA, and rapidly growing Czech wireless operator Oskar Mobil AS.
At the end of October last year, Vodafone paid INR 67bn ($1.49bn) to re-enter the Indian market when it purchased a stake of just over 10% in Bharti Tele-Ventures Ltd, India's mobile market leader. It also spent approximately ZAR 16bn ($2.41bn) to increase its 35% stake in one of South Africas largest mobile operators, Vodacom (Pty) Ltd, to 50%.
Vodafone said it will have a particular focus on profitable growth in emerging markets. This unit will also include the operators joint ventures, affiliates and investments, most notably, Verizon Wireless (USA), China Mobile (0941.HK - news) (China), Vodacom (South Africa), and SFR (France).
The key focus will be on maximizing performance and increasing, where possible, the benefits of being part of the Vodafone Group, the operator said.
The final division will be New Businesses and Innovation. This unit will be led by Thomas Geitner who is currently Vodafones chief technology officer. The aim of this unit will be to focus on converged and IP services to deliver new revenue streams.
This new structure is an important step forward for the group as it is aligned with our evolving strategy and addresses the different priorities across the group, said Sarin. It will enable us to continue to outperform our competitors as the changes deliver a streamlined and simple structure with a clear focus. By creating three new business units, and with an increased focus on costs, we are reflecting the different approaches that will be required to continue to succeed, both in terms of our existing operations and in capturing new revenue streams for the future.
Shares in the operator rose 0.6% to 124.25 pence ($2.17) on the London Stock Exchange (LSE: LSE.L - news) as of 4.30pm GMT Thursday.
Sarin is looking to provide some much-needed future direction for the Newbury, UK-based operator, especially after the failed $40bn bid for AT&T Wireless Services LLC in February 2004. This failure was compounded last November when a 5bn pound ($8.75bn) tax bill appeared out of the blue. This angered investors and the operators share price dropped 10%, wiping nearly 10bn pounds ($17.5bn) from its market value.
Then in February this year, Sarins authority was called into question when Vodafone announced a writedown of between 23bn pounds ($40.26bn) and 28bn pounds ($49bn) off the value of its assets. It also said it expected its growth rate to slow to between 5% and 6.5% in fiscal 2007, compared to a forecast 6% to 9% this year.
A boardroom battle then followed that saw former chief executive Sir Christopher Gent relinquishing his life presidency, and the departure of chief marketing officer and executive director Peter Bamford. Vodafones deputy chief executive Julian Horne-Smith, is to leave in the summer, and Vodafones chairman, Lord MacLaurin of Knebworth, is to hand over his chairmanship of the mobile giant to Sir John Bond, although he will remain with the operator after accepting two minor roles.
Since then, in March Vodafone sold Vodafone KK to Japanese ISP Softbank Corp for JPY 1.8 trillion ($15.5bn). Sarin intends to distribute 6bn pounds ($10.53bn) to shareholders, either by way of a special dividend, or by issuing new shares. However, critics accused him of using the proceeds as hush money to silence investor unrest.
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Posted: 2006-04-10 11:36
