Blog: What challenges does new Vodafone chief face? – Mobile World Live

Blog: What challenges does new Vodafone chief face?

03 OCT 2018

Former Vodafone Group CFO Nick Read (pictured) took over the top job from Vittorio Colao earlier this week, but with a deal to acquire Liberty Global’s assets in Germany and Central and Eastern Europe (CEE) incomplete, and several European units experiencing fierce price pressure, he faces a challenging start.

Before leaving, Colao (who held the role for ten years) tied-up several loose ends at the company. Its long-standing problems in India appear over following a merger of its local unit with Idea Cellular, while its Africa footprint consolidated more neatly into subsidiary Vodacom.

The moves leave a company heavily focused on Europe where, arguably, it has plenty of work to do due to fierce competition (especially in Spain and Italy) and an ongoing convergence strategy across its footprint.

Under siege
IHS Markit executive director of research Stephane Teral (pictured, right) told Mobile World Live (MWL): “Clearly Vodafone is under siege” due to “stagnant if not declining revenue in every single European market”.

He added its businesses in Spain and Italy required the most attention with the need for “simplified low-priced packages” to counter aggressive deals from newcomer Iliad.

CCS Insight principal analyst Kester Mann (pictured, left) added the company needed to “strap in for a bumpy ride in Southern Europe as assertive pricing strategies from rivals show little sign of easing. In particular, Iliad’s launch into Italy just a few months ago has already eroded significant value from the market.

“Having caused havoc in France [under the Free Mobile brand] during a tumultuous period from which rivals are only just recovering, the operator [Iliad] has been up to its old tricks with a series of near-unbelievable offers”.

Along with other rivals, Vodafone slashed prices in Italy shortly after Ilaid’s entry and has since launched low-cost brand Ho in the market.

Mann added Read could also face “early battles” due to activist investor Elliott Management, which was credited with helping oust Vivendi from control of Telecom Italia’s board, taking a stake in Vodafone. The analyst pointed to Vodafone’s net debt of €30 billion and declining share price since the turn of the year as potential pain-points for investors.

Despite these challenges, Mann noted Read had “often co-architected strategy” with Colao and should be considered a “safe pair of hands”.

Ovum principal analyst Dario Talmesio (pictured, left) agreed Vodafone was unlikely to see a drastic change of direction under its new chief: “I could not think of anyone who’s most likely to continue the strategy and execution designed by Colao,” he told MWL.

Rather than issues in southern Europe, Talmesio said Read’s greatest challenge would be integrating Liberty Global assets post-acquisition and upselling services.

He added the UK could also prove problematic with competition “very tough” and the market “chronically weak,” adding it should be addressed with an approach “that is coherent with the group’s strategy, meaning that they need a strong fix, literally.”

Striking for Liberty
While operational issues in Europe may prove the core day-to-day problem, the most high-profile early challenge is likely to be persuading regulators to wave through its deal for Liberty Global’s assets in Germany and CEE.

Its acquisition attempt was trumpeted by Colao as offering a “converged national challenger” in Germany, the largest market in the deal.

On its July financial results call, Colao said he and Read had met a number of regulators in Europe to discuss the agreement ahead of the formal approval process.

However, the European Commission is yet to examine the acquisition and Deutsche Telekom, which has been extremely critical of the move, is also calling on regulators in Germany to assess the transaction.

Though the result of any competition probe is out of Vodafone’s hands, the outcome and reaction to it is likely to be one of the defining elements of Read’s early tenure.

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

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Chris Donkin

Chris joined the Mobile World Live team in November 2016 having previously worked at a number of UK media outlets including Trinity Mirror, The Press Association and UK telecoms publication Mobile News. After spending 10 years in journalism, he moved...

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