“With friends like that, who need enemies?” Arun Sarin, the chief executive of Vodafone must have been thinking along those lines yesterday.
There is a snag with being the biggest in the world. Vodafone is the number one wireless operator across the globe, but that means your fortunes are tied more specifically to the sector you dominate. If you are a small player, the sector can contract, but you can grow, by improving your market share. For Vodafone, no such luxury exists.
And it’s becoming tougher. Price competition is driving down margins and VoIP from wireless internet access will, when it becomes a mass medium, drive prices down much further still.
Vodafone, like many of its rivals is moving into offering broadband. It smacks just a little of vacating the frying pan to embrace the fire - the new heat being the horrendously competitive broadband market.
Perhaps the last refuge for Vodafone is in content supply. You might expect to pay less for your calls, but are you willing to pay more to view the latest movie, or sports contest?
Ultimately, that’s dangerous too. You don’t have to be a wireless operator to offer content; the fact that broadband internet access is available through wi-fi and soon will be through wi-max hot spots while you are out, will mean the opportunity to view movies irrespective of mobile network provider.
So, Vodafone has plenty of excuses. Plenty of reasons to explain why its share price today is lower than it was in November. And despite announcing a 9.2 percent growth in revenue in the last quarter over the same period a year ago, shareholders are not happy and many are likely to vote against him today at the company’s AGM.
Morley Fund Management, Hermes Pension Management and Standard Life Investments, for example, all want him out.
His big ally was Bill Morrow. Hailed by some as Sarin’s long term successor, Morrow was moved into the postion of head of operations in Europe back in April. But yesterday it emerged that Mr Morrow, for reasons that appear to be genuinely personal, is to step down. He is to spend more time with his family - and on this occasion, the “time with family” reason appears to be without euphemism.
Even so, the news of Mr Morrow’s departure has put more fuel on the fire beneath Sarin.
What about firendly shareholders? Vodafone’s second largest shareholder wants to keep him. In a statement yesterday, Legal General said this “We do not think it is sensible to change chairman and chief executive at the same time and we would expect Sir John Bond as incoming chairman to conduct a full review of all his senior executives and make changes where necessary.”
So do you see what we mean? With friends like Legal and General…
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