/ 17 March 2006

Vodafone chief victorious

Vodafone shares surged as investors bet that the cellphone company was ready to scale back its global operations after the apparent victory of chief executive Arun Sarin in a boardroom row.

The company has already agreed to a deal to sell its Japanese business while its partner in the United States, Verizon, expressed interest in buying out Vodafone. Reports last weekend suggested Verizon recently made an informal approach valuing Vodafone’s stake at £23-billion.

Sir Christopher Gent, who built Vodafone into the biggest firm of its kind through an aggressive acquisition strategy, severed his ties with the company last weekend, giving up his honorary title of lifetime president.

Gent was said to have supported chairperson Lord MacLaurin’s efforts to unseat Sarin.

MacLaurin also appeared to accept defeat at the weekend, issuing a statement that gave Sarin his backing.

”Gent leaving is fantastic news for Vodafone shareholders,” said one analyst, who asked not to be named. Sarin, he added, ”is as qualified as the next telecoms executive, but will now be without the distraction of infighting or being undermined. He will give up on making further acquisitions.

”I feel sorry for him, to be frank. He was brought in to clear up the mess created by Chris Gent, which was a very tough task, and they had the nerve to undermine him.”

In a note to clients, investment bank Morgan Stanley said the global strategy pursued by Vodafone appeared to have come to an end. ”We believe Vodafone’s coming strategy reappraisal will include selling strongly performing assets, not just the underperformers.”

Vodafone was the second biggest riser in the FTSE 100 this week.

Shareholders who had been vocal about their frustration with the Vodafone management hoped to draw the curtain on the public theatre of the past few weeks and declined to make further comment. ”What we need now is less press coverage, not more,” one said.

Vodafone is expected to try to repair the damage to relations with key shareholders caused by the internal bust-up.

There were also reports last weekend that a consortium of private equity investors might be lining up a rival bid for Vodafone’s Japanese operations, which the group has agreed to sell to the Internet firm Softbank.

The prospect of a leaner, fitter Vodafone this week caused a ripple of anxiety among shopkeepers in Newbury. The cellphone company employs about 3 500 people in the Berkshire town — 10% of its population. It recently decamped to a business park on the outskirts of town that many believe led to a 10% drop in turnover for most retailers. A slimmer company under Sarin could mean job cuts and a further loss of business.

Vodafone sponsors the local rugby club and several schools in the area and its name is writ large on the grandstand at Newbury racecourse.

”It still underpins the local economy,” said Jonathan Bastable, a partner at estate agents Burrough and Company. He sells many of the homes advertised in his shop window to Vodafone executives. ”Christopher Gent leaving will make people a little nervous.” — Â