Challenge faced by Vodafone's new UK CEO

Challenge faced by Vodafone's new UK CEO

‘It just shows what a difference a year makes,’ one senior Vodafone UK source said last week, reflecting on the contrasting performance of the UK business in 2008 compared with the previous year.

The last 12 months have been tough for Vodafone UK, and the cracks began to appear in UK CEO Nick Read’s stewardship. He is one of the most highly rated executives in the Vodafone group, and in the UK mobile industry as a whole, and continues to carry a strong reputation. This is underlined by his promotion to the position of CEO for Asia Pacific last week – see box below.

Read (pictured, below) took the UK CEO position at Vodafone in early 2006, taking over from Tim Miles. Read was the fourth UK CEO in four years following Gavin Darby, American Bill Morrow and then Miles, and was successful in instigating a period of change where a real difference could be seen in the UK business. Now new CEO Guy Laurence takes the reins after a successful stint at Vodafone Netherlands.

Things dried up for Read this year, largely due to external factors. Failure to agree on infrastructure valuations led to a highly diluted and disappointing network share arrangement with Orange. Revenue share deals with manufacturers collapsed. Missing out on the iPhone appeared costly, and it was a follower rather than a leader in Sim-only and mobile broadband. Vodafone has cited intense competition in the UK as well as regulatory factors for the slowdown in the company’s performance.

Elsewhere, Vodafone has appeared indecisive on its fixed-line broadband ambitions. It launched a service at the top end of the market, but that fizzled out while the company looked at making an acquisition for Tiscalli. However, interest in buying Tiscalli waned as Vodafone appeared to see the deal as a costly incursion into a highly competitive space. O2 appears to have made steady progress on home broadband without sinking huge sums on buying an established player.

Critics also point to poor take-up of Vodafone’s MusicStation proposition as another blow to the business. When Vodafone finally entered the dongle market, it had to drop its prices to match 3’s and went on an expensive advertising blitz.
Asked to pinpoint Read’s major achievements, the senior Vodafone UK source said: ‘Taking out Carphone [Warehouse] was probably the highest profile, but I think the bigger stuff was changing the entire culture within the organisation.’
Dropping Carphone Warehouse in October 2006 was driven by then commercial director Ian Shepherd, but Read was the man who pushed it.

Several sources within Vodafone credit Read with pushing out the stuffy ‘old boys’ culture, with a series of more commercially minded and entrepreneurial senior appointments.

Most significantly, Read set out a plan to lift the UK business from its lumbering corporate stasis, and set out a plan to grow.

Another source within the Vodafone group says: ‘There has always been a lot of pressure on the UK because it is Vodafone’s domestic market, and there’s a symbolic importance to be the market leader at home.’

‘Winning in the market’
Read set out his now famous ‘winning in the market’ plan; a detailed agenda with a series of milestones and strategies. The UK source says: ‘What Nick did was completely align the business behind his plan. Everyone was behind him and believed in him. He was a great leader and communicator.’

Vodafone UK quickly saw results. Vodafone recorded 1.8 million net new customers from September 2006 to September 2007, beating rivals.

Speaking in December last year, Read said: ‘We’re number one in terms of revenue market share, number one in post-pay market share (number of customers and revenue), number one in the enterprise market and number one in EBITDA.’

Read reflected on his biggest success: industry-leading churn at just 15.3% on contract in comparison with O2 on 20.5%, while Orange and T-Mobile lagged further behind with 22.7%.

One Vodafone source says the climate is very different now: ‘O2 has made life difficult for the [Vodafone] UK business. Europe has been tough for everyone at Vodafone this year but the UK has performed badly. The UK team has been talking up a recession, but it is difficult to argue because of the strides O2 has made.’

As well as pulling ahead in consumer postpay and prepay, O2 has started making a sizeable dent in Vodafone’s once unassailable enterprise market – especially in the corporate space, snatching huge corporate accounts such as Network Rail, BMW, Homeserve, Halfords, Wachovia and Computer Cabs.
The task Read’s replacement faces is clear to those close to the business. The new man from the Netherlands will have to ‘stabilise the business and drive the main priorities’. Laurence’s first steps will be eagerly watched as Vodafone attempts to overtake O2.

What’s next for nick?
Read will be swapping the market share and churn battle of the UK to a volume landgrab in emerging markets.

He will be boss of former UK colleagues Richard Daly in Egypt and Kyle Whitehill in India. His role covers Australia, New Zealand, China, Egypt, Fiji and Qatar. Read will work with Vodafone chairman Sir John Bond who has experience of the political and commercial strategies to open up Asian and Middle Eastern markets from his time at HSBC.

Read will be pushing to buy small operators in Arab and South-Asian countries, but sources say Vodafone may lack the budget to make those deals. He will also work closely with another Vodafone group director, Simon Murray, a former senior executive at Hong Kong-based Asian conglomerate, Hutchison Whampoa (also parent company of 3).

Written by Mobile Today
Mobile Today


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