Vodafone at the crossroads

Succession plans are being drawn up for Sir John Bond but unrest points to deeper issues. Nick Clark reports

In Quantum of Solace, M warns James Bond: "When you can't tell your friends from your enemies, it's time to go." The advice may well have been noted with a wry smile by the fictitious British spy's namesake, Vodafone chairman Sir John Bond, whose tenure is expected to come to an end before next year's annual general meeting after increasing shareholder unrest.

Succession planning is well under way for the former chief executive and chairman of HSBC, with headhunter MWM Consulting hired even before the Ontario Teachers' Pension Plan (OTTP) called for his head in July. Yet, market experts believe Sir John's departure was inevitable anyway, and see the criticism as a warning from investors to the entire board that patience is wearing thin.

In the run-up to this year's annual general meeting in July, the OTTP demanded a rejuvenation of the board "and a re-examination of Vodafone's long history of poor capital allocation and disastrous M&A".

Sir John faced down the dissenters – which ultimately amounted to those with 6.5 per cent of the company stock. However, he has been chairman for almost five years and will celebrate his 70th birthday next year; many believe he would have been preparing his exit anyway.

Steve Malcolm, an analyst at Evolution Securities, said: "The last four or five years have hardly been sparkling and he has to take some responsibility for that. That said, it seems like a perfectly logical time for him to go."

Much of the recent investor ire had been directed at the previous regime under Arun Sarin, and Sir John's support of the big-ticket acquisitions. Little anger has been directed at his replacement, Vittorio Colao, so far – in fact, the OTTP openly backed him – but analysts believe it is little coincidence that rumbles of discontent have emerged shortly after his second anniversary at the helm.

Mr Colao outlined his plans to slash £1bn of costs, streamline the operations, and focus on cash generation several months after his appointment in 2008. It was clear that the days of Mr Sarin's marquee deals were over. The cost-cutting was completed a year ahead of schedule and he revealed at the end of 2009 that the group was to take out a further £1bn by 2010.

Vodafone insiders said that while streamlining the operations was ongoing, Mr Colao is focusing on three key trends. One is data. Vodafone is well placed to benefit from the rise of smartphones – especially as it now offers the iPhone – and the explosion in mobile data demand. The company is also aiming to have a "total communications offering" and has expanded into fixed line telephony and broadband. Finally, it is among the strongest mobile players in the business space, although that division has inevitably suffered in the downturn. Katja Ruud, an analyst at Gartner, said: "At the moment it is in quite a good place. It has a very large mobile operation with a big footprint. It has a good balance between consumer and business as well as between energy and developing industries. Yet it isn't fully consistent. It is difficult to see if the game is crystal clear going forward."

The market expects a dynamic strategy update from Mr Colao in November. Many believe it is time for the group to up its game, citing the recent shareholder rumbles as evidence. Robin Bienenstock, an analyst at Sanford C Bernstein, said: "This is a shot across the bows to the entire board. If you get rid of the chairman, nothing really changes, but you might light a few fires under others. It is an undisruptive way to get things moving."

So far the heat has worked. "The company has done well since that meeting," Ms Bienenstock said, noting the shares have risen almost 17 per cent since the start of July. Part of this has been driven by information investors have been desperate to hear, conveniently leaking out. These include the potential sale of its stake in China Mobile, worth up to £4bn, as well as talk it could offload its 44 per cent stake in French mobile operator SFR and the minority stake in Polkomtel of Poland. Yet, the most eagerly awaited announcement is over its 45 per cent stake in Verizon Wireless in the US. There is still no clarity as to whether it will wait for the dividend, deepen the relationship with partner Verizon Communications, or sell its stake.

This comes against a backdrop of an industry preparing for fourth generation network, rivals moving in from traditional telecoms groups as well as new threats from Google and Apple. Mr Malcolm concluded: "Vodafone's biggest challenge is establishing a true identity versus its competitors. Management is now getting to grips with the cost base and bringing the right scale economies to bear in the business, but the top line story is still very unclear; revenues are at the mercy of wider market trends."

Going? going? gone

Harvey McGrath, Prudential

As company directors and institutional investors alike return from the summer holidays, a number of FTSE 100 chairmen may find their positions under pressure. At the top of some shareholders' hitlists is Harvey McGrath, chairman of Prudential, the insurance company. Mr McGrath is regarded as having been extremely fortunate to ride out the immediate storm following Pru's disastrous failed bid for AIA, the Asian insurance business of AIG. However, some investors are understood still to be pressing for change at the top of Pru, which wasted £450m on advisers' fees during its tilt at AIA earlier this year. The debacle may even have turned Pru into a takeover target itself.

Sir John Parker, National Grid

Sir John, a widely respected figure in the City, is also the chairman of Anglo American, the mining company. Though he has been popular with shareholders in both businesses, the fact that he holds two FTSE 100 chairmanships at the same time is unusual. Sir John has reportedly told friends in recent weeks that he now plans to step down from National Grid next year after eight years at the helm. Earlier this year, the power company surprised investors by announcing a £3bn rights issue to pay for capital spending projects – it previously said such a fund-raising exercise would not be necessary – and it has also run into regulatory difficulties in the US.

Sir Stuart Rose, Marks & Spencer

Having faced sustained criticism from investors for serving as the retailer's chief executive and chairman simultaneously, Sir Stuart formally gave up the first of those roles earlier this year, with Marc Bolland, hired from supermarket group Morrisons, taking over. Sir Stuart is now due to vacate the chairman's office in January, when the investment banker Robert Swannell will take up the role. Sensitive to past recriminations about Sir Stuart's pay packet, Mr Swannell has accepted an annual salary of £450,000 (Sir Stuart is paid £875,000). Sir Stuart, meanwhile, rather fancies a move into television presenting.

Start your day with The Independent, sign up for daily news emails
Voices
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm tomorrow
Arts and Entertainment
Mark Wright has won The Apprentice 2014
tvThe Apprentice 2014 final
News
File: James Woods attends the 52nd New York Film Festival at Walter Reade Theater on September 27, 2014
peopleActor was tweeting in wake of NYPD police shooting
Arts and Entertainment
X Factor winner Ben Haenow has scored his first Christmas number one
music
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'
Marian Keyes: The author on her pre-approved Christmas, true love's parking implications and living in the moment

Marian Keyes

The author on her pre-approved Christmas, true love's parking implications and living in the moment
Bill Granger recipes: Our chef creates an Italian-inspired fish feast for Christmas Eve

Bill Granger's Christmas Eve fish feast

Bill's Italian friends introduced him to the Roman Catholic custom of a lavish fish supper on Christmas Eve. Here, he gives the tradition his own spin…
Liverpool vs Arsenal: Brendan Rodgers is fighting for his reputation

Rodgers fights for his reputation

Liverpool manager tries to stay on his feet despite waves of criticism
Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

Amir Khan attacks the Taliban

'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
Michael Calvin: Sepp Blatter is my man of the year in sport. Bring on 2015, quick

Michael Calvin's Last Word

Sepp Blatter is my man of the year in sport. Bring on 2015, quick