The writing was on the wall for Nick Read ahead of last month’s labyrinthine Vantage Towers sale, which saw Vodafone divest itself of a large stake in the German-listed company in a bid to ease its debt burden.
Instead of providing the desired boost, the deal served as a reminder that Vodafone is a failed M&A machine.
Under Read’s leadership, the share price fell 45% to less than a pound, capping a long streak of sub-octane performance that saw it fall from over 200p five years ago to levels current.
Bad connections: Vodafone consists of a run-down collection of telecom assets, is overexposed to the moribund German consumer market and has a reputation for bad business
Vodafone, spun off from Racal engineers in the 1990s, is one of the true pioneers of technology in the UK. It provides a metaphor for Britain’s productivity, management and shareholder failures.
Instead of wanting to become the world leader in mobile phones, it has, over the years, engaged in a sell-off of valuable assets, driven by an intense focus on satisfying investors with payments.
The result is that Vodafone now consists of a run-down collection of telecom assets, is overexposed to the moribund German consumer market and has a reputation for being unable to execute transactions efficiently.
This is evident from its failure to complete its much-vaunted merger with the Hutchison’s Three network.
Vodafone once roamed the world like a colossus. He set a precedent for German corporate takeovers by buying Mannesmann in 2000.
She owned and sold the largest mobile phone network in Japan. And he was a 45% minority investor in Verizon Wireless, which he sold for £78.4bn in 2014. The whole of Vodafone is now worth £25bn. This is large-scale value destruction.
In stark contrast, investing in the future, AstraZeneca faced an overseas takeover of Pfizer in the same year and nearly tripled in value to £173bn.
Read struggled, but he became the scapegoat of chairman Jean-Francois van Boxmeer and the board for years of disappointing performance.
Read was removed from his post after an emergency board meeting on Sunday. For the moment, it falls to Margherita Della Valle, the financial director, to sort out the mess.
What is desperately needed is someone with the vision to simplify a disparate collection of funds and bring the best parts of Vodafone forward.
Africa offers opportunities for growth. It will be essential to blackmail its investment in continental Europe, from Germany to Spain, with strong pushes on content. Getting the Three deal done in the UK would be a plus, but it’s a long shot due to competition concerns.
A battered share price, a discounted pound sterling and a temporary chief executive could make Vodafone a sitting duck for overseas buyers. Regulators beware.
Memory is a fun thing. When Liz Truss and Kwasi Kwarteng released the disastrous mini-budget in September, the CBI endorsed many of the proposals.
There was no mention of this in the latest CBI report on the economy. Instead, chief executive Tony Danker returned to Rishi Sunak’s Mais conference in February this year when the then chancellor made giddy promises to help invest and innovate. Most liabilities have been exorcised in the name of fiscal orthodoxy.
Danker laments that there is a failure in the UK to invest in capital, people and ideas. But who bears this responsibility? The company itself, as Vodafone shows, has to bear part of it.
Sunak offered a double deduction for capital investment after the pandemic, but there was very little uptake despite the opportunities for digital transformation.
It’s no coincidence that some of the UK’s best run businesses are overseas. Akzo Nobel, heir to ICI and Dulux paints, comes to mind.
It has put enormous effort into R&D and innovation in building the UK and global markets. The government can help, but CBI players have to look at each other.
The art of dealing
Bob Diamond is still looking for a deal. Protege Rich Ricci’s recent attempt to merge with broker FinnCap failed.
Now we hear from the US that Diamond-backed special purchase vehicle Circle has failed to get its £7.5bn plan off the ground.
The diamond nose for a bargain is legendary (remember buying the US arm of Lehman for Barclays) and last weekend was mentioned as a possible buyer of the investment banking arm of Credit Swiss.
He is nobody’s quitter.
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