February 5, 2023

ALEX BRUMMER: Vodafone’s bad calls

ALEX BRUMMER: Vodafone may be a shadow of its past but it does have huge opportunities

<!–

<!–

<!– <!–

<!–

<!–

<!–

The predictable City response to the departure of Nick Read at Vodafone is sell, sell, sell! That is accompanied by a chorus of calls to cut costs.

Anyone familiar with Vodafone’s history as a leading edge, global mobile phone pioneer will be aware that these are precisely the causes of the group’s calamitous collapse in value.

If successive chief executives had the courage to resist the short-term pressure from investors, built on existing assets and splurged on R&D and innovation, Britain might genuinely have had a ‘Silicon Valley’ style behemoth and created an excitement around mobile telephony, its own fintech and gaming apps and much else.

The road back: Vodafone could cash in on the dire customer service of its rivals to become best in class

Dispensing with Read was an easy move for a divided board.

A better place to have started might be the chairman Jean-Francois van Boxmeer. A refugee from Heineken, van Boxmeer may be a great brewer but is ill-equipped to be a leader in the fast-changing telecommunications industry.

There is a terrible tendency among head hunters tasked by FTSE 100 firms to think that skills honed by executives in Europe, with little experience of Anglo-Saxon capitalism, are fit to be handed the controls. Vodafone may be a shadow of its imperial past but it does have huge opportunities.

Germany and Spain are difficult competitive markets, but with marketing, innovation and better apps they could be made to work. 

In the UK, instead of waiting for Three to fall into its hands, Voda should seek to cash in on BT’s shortage of ambition and the convergence of mobile and broadband to fill the vacuum. It could cash in on the dire customer service of its rivals to become best in class.

Instead of allowing its emerging market/developing country exposure in South Africa and elsewhere to be seen as surplus to requirements, it should view them as a bridgehead to growth. 

Voda should also be working flat out on developing better inter-operability in the US. It is unconscionable that UK Vodafone users travelling to Washington receive a message from AT&T, on arrival in the US, informing them that voice calls are not possible and to go to settings and find another provider. That is fine in principle, but is clunky and unreliable.

Former Voda chief executive Arun Sarin was effectively muscled into selling the minority stake in Verizon Wireless in 2014 only to depart from office shortly afterwards. 

That sale left the UK without any serious skin in the world’s biggest consumer market. Diageo, Unilever et al have demonstrated what UK plc can achieve over there with the right skills, ambition and mindset.

Recruitment of a chief executive and (soon afterwards) a fresh chairman, from an appropriate gene pool, is critical if the 5G, 6G and broadband transformations are to be embraced.

Shapps slips

The National Security and Investment Act was meant to put an end to the saga of great British companies falling into the hands of overseas buyers without scrutiny.

The £10billion sale of Cambridge-based manufacturing software group Aveva to Schneider clearly should have gone to the Competition and Markets Authority for a full probe. Instead, the latest incumbent at the Department for Business Grant Shapps has nodded it through.

Imagine if this deal were the other way around and Aveva were seeking to buy a sizeable French software pioneer.

It simply would never be allowed to happen in France, a country which jealously defends its national treasures.

Nor would it have stood a chance in the US where the Committee on Foreign Investment would have been fearful of Schneider’s joint venture and other enterprises in China and the possibility of valuable tech transfer. The only remaining barrier is the German authorities.

In his Budget speech, Jeremy Hunt pledged to turn Britain into a tech winner. If the UK allows command and control of its valuable intellectual property (IP) to escape into overseas hands, that will never happen.

Dire straits

On that very point, well done to economic historian Chris Miller, author of Chip War, which has carried off the FT’s Business Book of the Year prize for 2022.

The book recounts how the US’s chip design helped win the last Cold War. The IP was then allowed to escape. 

Some 37 per cent of microprocessor tech is now in Taiwan, in range of Chinese precision-guided missiles. Yikes.

Source link