CEO Who Changed Aim of Vodafone Will Depart Arun Sarin is Stepping Down After Redirecting the Mobile Giant Toward New Customers in Emerging Markets

By Kevin J. O’Brien

Arun Sarin, the American chief executive of Vodafone, said Tuesday that he would step down after a sometimes turbulent five- year tenure in which emerging markets replaced wealthy Western economies as the driver of growth for the company and the cellular industry.

Sarin, who is 53, will be replaced by Vittorio Colao, the 46- year-old deputy chief executive of Vodafone, who said at a news conference that he would continue the push by Sarin to expand into Asia and Africa.

Sarin came to Vodafone in July 2003, three years after Vodafone acquired AirTouch Communications, a wireless operator based in San Francisco of which he had been president. Under Sarin, Vodafone nearly doubled its number of customers to 260.5 million, largely by entering relatively untapped cellphone markets in India, Turkey and eastern Europe.

That total places it second globally, after China Mobile, which has 370 million subscribers, although Vodafone, which is based in Newbury, England, is the largest operator in terms of revenue.

The timing of his departure surprised some analysts, because Sarin had recently solidified his leadership after a rough start.

“This was the right time to leave,” Sarin told analysts. “We are now well-positioned strategically.” The announcement came as the company reported that its profit in the year ended March 31 rose to pound(s)6.6 billion, or $13 billion, from pound(s)6.2 billion a year earlier.

Shortly after Sarin took over, British investors opposed his bid in 2004 to acquire AT&T Wireless, at the time one of the largest U.S. carriers. The purchase would have made Vodafone, which owns 45 percent of Verizon Wireless, the largest U.S. cellular operator. Instead, AT&T Wireless was bought by Cingular, and the combined company is now the U.S. market leader.

“Ironically, the collapse of the AT&T bid proved to be a watershed for the company, and allowed Arun Sarin to really recover and put the company back on track again,” said Mark Newman, an analyst in London at Informa Telecoms & Media, an industry research firm.

Around the same time, growth in saturated European markets, which still make up about 70 percent of sales, was slowing. Write-downs on multibillion-pound acquisitions by Chris Gent, the predecessor to Sarin, began to hammer Vodafone’s financial performance and stock price. For the financial year that ended in March 2006, Vodafone reported a pound(s)21.9 billion loss, described as the largest in European corporate history.

Sarin trimmed the presence of Vodafone in Western European markets by selling operators in Sweden and Belgium, where penetration approached 100 percent, but added operations in relatively underdeveloped markets like Romania.

Vodafone also sold its mobile business in another saturated market, Japan, where it had been losing market share to its larger competitors, NTT DoCoMo and KDDI.

Sarin followed with two of his biggest acquisitions, both in emerging markets: the $10.7 billion purchase in May 2007 of Hutchison Essar, with 44 million customers in India, and the 2006 purchase of Telsim in Turkey for $4.6 billion.

Colao, a former chief executive of the Italian operator Omnitel Pronto Italia, which Vodafone acquired in 2000 when it bought the German operator Mannesmann, said he would continue the focus on acquisitions in fast-growing markets.

“As we have said in the past, we are interested in large markets in Asia and Africa, where there is potential for growth and where any acquisitions will be weighed against our strict financial standards,” said Colao, who was a consultant at McKinsey & Co. from 1991 to 1998, and whose first position at Vodafone was as regional chief executive for southern Europe, the Middle East and Africa.

Sarin said Vodafone wanted to acquire control of Vodacom, the South African wireless market leader, in which it has a 50 percent stake, and use the company as a springboard to buy other operators on the continent.

“Our African strategy is to get control of Vodacom and, on a country-by-country basis, build up our footprint,” Sarin said. “We will continue to perfect this in the next year or two.”

Vodafone executives have said they are not interested in bidding for MTN Group, an operator based in South Africa that has attracted the attention of two Indian companies, Bharti Airtel and Reliance Communications.

Vodafone is also looking for opportunities in China, where it already owns a 3.3 percent stake in China Mobile worth about $10 billion, the company said.

Both Sarin and Colao stressed that the leadership transition would not signal a new strategic direction for Vodafone. Sarin said the board of Vodafone, rather than its management team, determined the direction for the company.

“The board has been involved in setting the strategic direction of our company for the last seven years,” Sarin said. “In that time, the world has not changed so much from a customer point of view that we will change our strategy. So no change in strategy, and a continued focus on execution.”

Originally published by The New York Times Media Group.

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