"Mr.
Sarin inherits a company in good shape, by the dented standards
of international telecoms", quoted The Economist
on the arrival of Arun Sarin as CEO, Vodafone (world's largest
wireless operator), in 2003. Sarin had the onus to steer the
British giant to glory after the retirement of his predecessor,
Chris Gent, who was a flamboyant dealmaker. However, the task
to take the fledgling giant on to the global stage has proved
to be more daunting than what the IndianAmerican CEO might
have expected. The company's latest quarterly results present
a grim picture about the financial health of the company (it
reported a loss of £22 bn for FY06, worse than the loss
of £13.5 bn it incurred in FY02; both the losses were
the largest ones in European corporate history). Though the
recent losses are mainly accounting losses and stem mostly
as a result of the writeoffs from acquisitions in Germany
(which accounts for the lion's share), Italy and Sweden, the
bigger concern is Vodafone's overdependence on voice calls,
which account for over 80% of its revenue, but face increased
threat from VoIP (Voice over Internet Protocol). All these
call into question its twopronged strategy to "go global"
(to gain scale economy) and "be mobileonly" (to
focus on the fastgrowing wireless segment). Certainly, these
are tough times for the world's largest wireless operator's
chief.
The
Economist comments that the very strategy responsible
for Vodafone's rise is now turning out to be its doom. For
instance, it emphasized expansion over efficiency in its quest
for gaining economies of scale. Further, its preoccupation
with wireless seemed shrewd when fixedline phones ruled the
roost; however, it now appears out of sync with the latest
trend of convergence or "quadrupleplay" of voice
calls, broadband, television and wireless services. Cyrus
Mewawalla of Westhall Capital reckons, "Vodafone should
move from `pure mobile' strategy to `converged services'just
the sort of thing championed by AT&T." It is not
that Vodafone was unaware of the flaws in its strategy; however,
all along, it failed to admit it, at least publicly. But now
the wireless goliath wants to make amendments. |
