September 10, 2008

Colao Makes His Mark at Vodafone As Former Rival Quits in Reorganisation

By Sarah Arnott

Vittorio Colao, the new chief executive of Vodafone, has made his first big mark on the business with a package of personnel and organisational changes that include the departure of one of his rivals in the race for the top job.

The reshuffle is the first big change since Mr Colao took over from Arun Sarin in July.

The biggest decision is to split up the vast Emapa division, which covers eastern Europe, the Middle East, Africa, Asia-Pacific and "Affiliates", including the 45 per cent stake in Verizon Wireless in the US.

There will be one business unit for Central Europe and Africa and another for the Asia-Pacific region. The US investment, which is described as of "financial and strategic importance" - and which is now valued at $60bn (34bn), compared with its original $25bn price tag in 2000 - will not be part of an operating region, but will be under the direct oversight of Mr Colao.

Paul Donovan, chief executive of the Emapa division and one of the contenders to replace Mr Sarin, will step down at the end of the year. Mr Colao said: "I want to extend my thanks and appreciation for all that Paul has done for our business and in particular his role in expanding our emerging markets portfolio."

Commentators view the departure in somewhat cynical terms. "The reorganisation effectively left Paul Donovan without a job," one City analyst said. "Maybe Vittorio Colao wanted two slightly more junior people running those two business units, rather than one person wielding such a lot of power because they spoke for such a large chunk of the business."

The appointment of two chief executives to fill the roles created out of Mr Donovan's job will be announced in due course, says Vodafone.

As the concrete evidence of Mr Colao's plans for Vodafone, the changes will be subject to considerable scrutiny. The splitting of the Asia and Africa divisions, for example, may be interpreted as a response to changing situations in the two regions - the green shoots of liberalisation in some Asian countries calling for a different strategy than expansion, most likely through acquisition, in the mature markets of Africa.

But the response in the City yesterday tended to be more prosaic. "Splitting up divisions and putting different managers in doesn't necessarily mean anything," one analyst said. "You can rearrange things and see no difference at all, or change just a few individuals and create a different organisation. All we really care about is what the profits do, and only time will tell as to what difference it makes to the numbers."

An analyst at another bank said: "Put simply, this is just Vittorio Colao consolidating his power base."

Alongside the organisational change, Vodafone is also hiring Michel Combes, a former senior executive at France Telecom, to run its European business. Mr Combes is currently the chairman and chief executive of TDF Group, a private equity-backed French network operator.


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