also need to possess an eye for detail.” In this respect,
he adds, although Colao is not necessarily regarded as
such a broad strategic thinker as Sarin, he undoubtedly
appears to be ‘more of a shrewd operator, with a deeper
understanding of the individual parts of the business,
and precisely how they best fit together’. Indeed, one of
Colao’s first acts as the newly-appointed CEO was to
stress that the company was intending to ‘batten down
the hatches’ to survive the ongoing economic tumoil, and
to add that the days of multi-billion pound deals were over.
Essentially tearing up the elaborate five-point business
strategy that had been in place at Vodafone since May
2006, Colao said that “it is time to focus on the company’s
existing assets, rather than acquire new ones” in an effort
to concentrate on cost control. Further still, as he unveiled
his first set of results in July 2008 since taking the top
job, which showed that revenues were expected to fall to
between £38.8bn and £39.7bn for the first 12 months to
December 31, Colao committed himself to cutting £1bn
per year from the group’s £22bn operating costs by 2011,
with a concomitant reduction in the firm’s 80,000-strong
global workforce.
Having trimmed away the operational frills, Colao
has now pared down his narrower strategy to focus on
customer value offers, mobile data, business customers,
and fixed broadband. This ability to see both the wood
and the trees, as Luke puts it, has already yielded
positive results. In the quarter ending December 31, the
group posted an increase in revenues of 14.3 percent,
to £10.47bn (although this had received a significant fillip
from favourable exchange rate movements), customer
use of their phones was up (a 10.3 percent rise in minutes
used) due to lower pricing, and the utilisation of mobile
data (to send emails, pictures, and access the internet)
rising 25.3 percent. Additionally encouraging, and another
part of Colao’s gameplan, was that handsets from the
lower and higher end of the market both sold well, with
the BlackBerry Storm phone achieving particularly robust
results.
Conversely, Colao has taken a somewhat more
sanguine view of the oft-hyped notion of the potential of
advertising on the mobile phone marketplace. “While we
all believe in mobile advertising, we have to recognise that
it hasn’t taken off as quickly as expected,” he says. In this
respect, it is certainly true that its supporters continue to
highlight forecasts pointing to mobile becoming the most
common way onto the internet within the next couple
of years, and the ongoing success of smartphones and
28 l Profiles
AppStore. Equally, though, the fact remains that a lack of
common standards across the industry in how operators,
handset makers, and the advertising agencies approach
the service, together with the generic problem of mobiles’
small screens, means that the industry remains a long
way from generating significant returns. In any event, of
course, a key sticking point for many would-be believers
in the efficacy of mobile phone advertising remains the
likelihood that the major share of any such marketing
dollars would likely go to the publishers, such as Google,
who control much of the web.
A natural, and critically important, adjunct of a CEO
being able to step inside and outside a business is his
ability to understand as many of its component elements
as possible, highlights Sam Barden, Chief Executive
Officer of SBI Fund Management, in Moscow. “There’s
one view that if you’ve run a successful business then you
can do the same with any business,” he says, “but I don’t
believe that it can be done without taking time out to learn
everything you can about the specifics of that particular
business.” In this context, Colao seems to have much
going for him, whilst Sarin clung on to his post as CEO
through 2006, the Italian got on with running a range of
Vodafone’s sprawling European assets, trying to squeeze
more revenue out of many markets that were nearing their
natural saturation point.
Given this experience, his subsequent rationalisation
of the firm’s geographical priorities would seem entirely
logical. In February, during his full-yeat guidance for
2008, Colao reported that organic revenue from Europe
had fallen 2.8 percent in Q208, with Spain performing
particularly poorly, dropping 5.8 percent over the period.
Worse still, Vodafone was forced to write down £1.7bn
on its Turkish business (entered into under Sarin), where
upgrading the network is taking longer than expected, and
in India (also a Sarin brainwave), despite the firm having
reduced its prices by 50 percent to attract new customers,
growth had slowed from 46 percent to 36 percent on an
annualised basis. In contrast, organic revenue was up 3.5
percent in the period in emerging Europe and Africa, and
increased 9.2 percent in Asia Pacific and the Middle East.
Consequently, Colao, through his Chief Financial Officer
Andy Halford, reiterated his view that: “It is critical that we
remain focused on managing external economic pressures
through good cash cost management, and this means
taking a more cautious and selective approach to global
expansion, and doing simple things well.”
In its traditional markets in Europe, such as Germany,
this has meant, according to country boss, Friedrich
Joussen: “Fighting back against declining prices in the
traditional voice business by expanding our data and
broadband business, introducing new and simpler
offerings, and controlling costs.” While in the newer
markets, it has led to Colao taking an extremely rational,
focused approach, evident in its 70 percent stake in
Ghana Telecom, and in looking at opportunities in Nigeria.
Indeed, in this latter regard, Colao stated last November
It is critical
that we
remain
focused on
managing
external
economic
pressures
through good
cash cost
management,
and this
means taking
a more
cautious and
selective
approach
to global
expansion,
and doing
simple things
well
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