Vodafone makes a U-turn on strategy

Vodafone makes a U-turn on strategy: "Vodafone made a strategic U-turn, signalling a push into fixed-line services and redrawing its organisational chart just 18 months after the mobile operator's last shake-up."


Vodafone makes a U-turn on strategy
Andrew Edgecliffe-Johnson and Mark Odell in London
Published: April 6 2006 11:07 | Last updated: April 6 2006 19:15

Vodafone Company LogoVodafone made a strategic U-turn on Thursday, signalling a push into fixed-line services and redrawing its organisational chart just 18 months after the mobile operator’s last shake-up.

The wide-ranging reorganisation will create three business units, including a division responsible for finding revenues from new “converged” services emerging from internet technology.

The news marks a radical shift away from Vodafone’s insistence that its focus was solely on wireless technology and brings it more into line with the strategies being pursued by rivals such as France Télécom, the owner of Orange.

Analysts broadly welcomed the move, saying the volte-face was overdue, although James Barford of Enders Analysis said: “They’re all doing it because it looks good on a strategy slide, but consumers are not interested in those type of converged services.” Mobile and fixed-line buying habits are different, he argued.

The reorganisation is also aimed at cutting costs in mature markets and driving growth in emerging markets. It creates a new cadre of potential internal successors to Arun Sarin, Vodafone’s chief executive.

The restructuring follows months of boardroom upheaval at the world’s largest mobile operator by revenues. It comes less than a month after it announced its retreat from Japan and amid continued speculation about whether it might sell its 45 per cent stake in Verizon Wireless of the US. The company will now be structured into two operating units, one covering mature markets in Europe and another spanning the faster-growing markets of central Europe, the Middle East and Asia-Pacific.

Vodafone signalled the European division would focus on cutting costs, although analysts’ demands for more details of its plans will not be answered until a strategy presentation at the end of May.

The creation of a “new businesses and innovation” division led to speculation that Vodafone could make acquisitions of fixed-line operators such as BT, although the company played down the idea, signalling instead that it would take a more “infrastructure-lite” approach by using access arrangements, alliances and partnerships. The restructuring elevates Bill Morrow, the former chief executive of its Japanese unit, to run the European business. Paul Donovan, former head of some of Vodafone’s smaller subsidiaries, will see his role extended to cover Central Europe, Middle East, Asia- Pacific and affiliates.