Vodafone (UK)

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Vodafone is one of the world's biggest mobile operators by global footprint, with a direct presence in more than 20 countries, and partners or affiliates in many more. The Vodafone brand now reaches over 520m customers worldwide, although its key markets are still mainly in Europe. Nevertheless, the group is building a significant position in India and South Africa. For several years it derived a substantial profit (on paper at least) from a 45% stake in Verizon Wireless of the US. In 2013, after years of on and off negotiation, the group managed to convert that holding into cash, agreeing to sell the shares back to Verizon for a whopping $130bn, the second largest deal in corporate history to-date. Vodafone originally transformed itself into a global giant with two breathtaking deals at the end of the 1990s in which it acquired US company Airtouch and German industrial and telecoms giant Mannesman. At its peak at the beginning of 2001 it was Europe's most valuable company and one of the world's top 10. More recently, however, the group has come under increasing pressure from its shareholders to find new ways of delivering further growth. Some analysts believe break-up or sale might be the best solution for the group, and there have been tentative discussions regarding some form of merger with cable group Liberty Global. Certainly, Vodafone's current strategy is to offer a converged service combining mobile communications with streamed media content.

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Adbrands Weekly Update 17th May 2018: Vittorio Colao said he will step down as CEO of Vodafone later this year after a decade in his role. His successor will be current CFO Nick Read. That follows the announcement last week of Vodafone's proposed acquisition from Liberty Global of cable TV operations in Germany and three C&E European countries. Vodafone also reported better than expected results for the year to March. Revenues slipped back by 2% to €46.7bn as a result of currencies and the deconsolidation of Vodafone Netherlands into a joint venture with Liberty. However operating profit surged by 15% and net profit rebounded to €2.8bn after the prior year's €6.1bn net loss.

Adbrands Weekly Update 10th May 2018: Mobile operator Vodafone pushed further into cable TV with a deal to acquire the local operations of John Malone's Liberty Global group in Germany, the Czech Republic, Hungary and Romania. Enterprise value of the deal is estimated at €18.4bn. Vodafone already has a substantial mobile presence in Germany, and owns the leading cable provider. The addition of Liberty's Unitymedia, its biggest domestic cable rival, creates an even stronger challenger to local broadband and telecoms leader Deutsche Telekom. Vodafone Kabel and Unitymedia currently serve different areas of the country, so there is no geographic overlap between the two, reducing the likelihood of regulatory issues. Liberty's UPC is the dominant cable provider in the Czech Republic and Hungary and a strong #2 in Romania. However, the merger is expected to provoke considerable opposition from Deutsche Telekom - the main rival in all four markets - as well as traditional broadcasters. Telekom CEO Timotheus Hoettges recently told investors "There will be no way that this deal is going to be approved and for us it's completely unacceptable." The purchase will be made with a mixture of cash and bonds. Most observers expect Liberty to respond with a deal of its own to strengthen its remaining cable operations in Europe, not least in the UK, where it owns Virgin Media.

Adbrands Weekly Update 15th Mar 2018: Ads of the Week: "Raising Voices". Here's an admirable campaign from Santo - part of WPP's dedicated Team Red team - for Vodafone. Shame it didn't make more noise about itself in advance of International Women's Day last week. It's a brilliantly effective approach, though, and all credit to Vodafone for tackling the issue head on. So in the spirit of true equality would it be unfair of us to ask another question: "Why are only two of Vodafone's 14-strong executive team women?"

Adbrands Weekly Update 23rd Mar 2017: Vodafone confirmed plans to merge its Indian subsidiary with publicly quoted rival Idea Cellular, creating a new local leader with nearly 400m customers and around 35% share. Vodafone will control around 45% of equity, partnered by Idea's main shareholder Aditya Birla Group with 26%. Most of the remaining shares will be publicly owned.

Adbrands Weekly Update 2nd Feb 2017: Vodafone is in talks to merge its operation in India with local competitor Idea Cellular. Vodafone would remain part-owner alongside Idea's current owner Aditya Birla Group. The Indian mobile market has been thrown into turmoil by the aggressive arrival of the Reliance Industries conglomerate, whose new Jio service offers free nationwide voice and data for six months to new customers. Currently Vodafone is the local #2 behind Bharti Airtel, which has around 266m customers. Merger with Idea would push it into the #1 spot with 375m connections.

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Free for all users | see full profile for current activities: In 1982 Gerald Whent, chief executive of the radio division of British electronics company Racal, persuaded his group's board to bid for one of the first UK cellular licenses then being offered by the government. Other electronics companies were dismissing cellular telephony as a passing fad, but Racal's bid was successful. A new division, Racal Telecomms, was set up to operate the service, which launched as Vodafone on January 1st 1985. Rival Cellnet, originally a joint venture between BT and Securicor, launched a few weeks later. Initially Vodafone's service was limited to major urban centres, it was expensive, and the phones themselves were extremely bulky, around the size of a small briefcase. However by the end of that year, coverage had spread to cover much of the UK, and the company had signed up 19,000 users. That number had more than tripled by the end of 1986, rising again in 1987 to 136,000 subscribers, giving Vodafone more users than any other mobile phone company worldwide at the time.

In 1988, Racal floated off a 20% shareholding in its Racal Telecomms subsidiary, which was already generating over a third of the group's profits. Three years later Racal Telecomms, now renamed Vodafone Group, was fully demerged as a standalone business, with just under 700,000 customers. That year saw another important development with the formation of the first international roaming agreement, with Telecom Finland. In 1993, the company's userbase topped 1m for the first time, despite the arrival of a third competitor, One2One, backed by Cable & Wireless. Another rival, Orange, followed in 1994. With a commanding lead already established in the UK, Vodafone concentrated on the international market, forging roaming alliances with a number of other international operators. The company also joined with other companies to bid for new licenses in countries as diverse as South Africa, Greece and Fiji. In the UK, the group opened its first high street retail outlet, and signed distribution and resale agreements with Comet and other electronics retailers. Customer numbers soared, hitting 3.2m by the end of 1997, then almost 4.9m by the end of 1998. Meanwhile the group's various affiliated companies and international partnerships added almost a further 5m customers worldwide. Also in 1998, Chris Gent, the managing director of the company's UK network, was promoted to become chief executive of the group, replacing Gerald Whent. 

Gent presided over the most dramatic transformation in Vodafone's corporate profile. In 1999, he launched an audacious bid to acquire AirTouch Communications, then the leading independent US mobile service. This business had begun life as PacTel, the paging operation of Pacific Telesis, one of the "Baby Bell" companies spun off from Bell Telephone in 1984. During the 1980s, PacTel had begun adding international interests to its portfolio, including stakes in German cellular service Mannesman Mobilfunk and Japanese international call operator IDC. This led to a number of deals to provide technology and support services to cellular operators all over the globe, and in 1993 the company became one of the core founders of the Globalstar satellite communications project. PacTel went public in 1994 as AirTouch Communications, and began a series of moves to grow from the #5 to #1 US cellular service. These included the takeover of rival Cellular Communications, and the purchase in stages of the various cellular businesses of USWest, later to become MediaOne. The purchase of the latter's NewVector operations in 1998 made AirTouch the #2 US service after AT&T Wireless, with a predominantly West Coast service.

At the beginning of 1999, Bell Atlantic offered $45bn to acquire AirTouch and merge the two companies' operations. Bell Atlantic had a substantial mobile operation of its own, concentrated on the East coast of the US. Vodafone, keen to establish a presence in the US market, topped that offer with a bid of $60bn. Just three months later, the newly enlarged Vodafone Airtouch agreed a revised deal to merge with Bell Atlantic. The company was expanded still further by Bell Atlantic's subsequent acquisition of GTE Corp, and Vodafone's purchase of CommNet Cellular for $1.4bn. Following Bell Atlantic/GTE's rebranding as Verizon Communications, the whole mobile business was spun off in 2000 as Verizon Wireless, a 55/45 joint venture between Verizon and Vodafone.

But Vodafone had an even bigger target in its sights. Germany's industrial and telecommunications behemoth Mannesman had already undergone a series of profound changes since it was formed in 1885 to exploit a unique process for creating seamless steel tubes from single ingots. The Mannesman brothers Max and Reinhard sold out in 1900, and the company later expanded its operations globally, adding extensive mining and smelting operations to produce the raw materials needed to make its tubes. By the start of World War II, Mannesman was one of Germany's foremost industrial powers. It was carved up by the Allies in 1945, but reunited 10 years later, moving into hydraulics and automobile parts. The company's venture into mobile phone service in 1989 was a major diversification, but one that served it well when cheap steel imports from Asia severely damaged the core tube business. Mannesman Mobilfunk gradually became one of the group's core businesses and it was the first German mobile operator to post a profit in 1994. Between 1996 and 1998, Mannesman extended its interests with stakes in Italy's mobile service Omnitel, French carrier Cegetel and Austria's tele.ring. When Olivetti, its partner in Omnitel, was forced to sell off its own telephone interests as part of the deal to acquire Telecom Italia, Mannesman took control of Omnitel as well as Olivetti's fixed line service Infostrada. 

Until 1999, Mannesman had coexisted happily in the international cellular industry alongside Vodafone. But that year, the German company agreed to purchase UK mobile service Orange from Hutchison Whampoa. Vodafone perceived this move into the UK market as a distinct threat to its own operations there, and mounted an audacious takeover bid. A friendly offer was rejected, so Vodafone went hostile towards the end of the year, offering £79bn in stock for the German company. After several months of batting off a series of increasing bids, the Mannesman board was finally forced to surrender and agreed to accept a record bid of £105bn in February 2000. The acquisition of Mannesman brought with it a wide collection of interests in other mobile and fixed line services, as well as a host of industrial subsidiaries. Vodafone spent the next year or two selling off most of these unwanted parts. To comply with regulators, Orange was sold to France Telecom in June 2000 for around $37bn. Italian power company Enel agreed to buy Italian fixed line service Infostrada, which was merged into their Wind joint venture with France Telecom. 

Also during 2000, the group boosted its holding in Spain's second largest mobile phone operator Airtel from 21% to almost 74%, outmanoeuvring BT which was also negotiating to acquire control. In 2001 Vodafone agreed to buy 15% of Japan Telecom, Japan's third largest telecommunications operator, for $2.2bn, then the second-largest ever foreign investment in the country. A few weeks later, the group bought out AT&T's 10% stake to become the Japanese company's biggest shareholder with 25%. Vodafone already owned a stake in JT's mobile subsidiary J-Phone. The deal placed Vodafone once again in a battle for control with BT, who had a 20% stake. Already struggling with other problems, BT eventually threw in the towel, agreeing to sell Vodafone its minority stakes in both Japan Telecom and J-Phone, as well as Airtel. Also that year, Vodafone acquired leading Irish mobile service Eircell, a 25% in Swisscom, and just over a third of Iusacell, Mexico's second largest mobile operator. 

The group reported a staggering £8.1bn loss for the year to 2001, largely as a result of the non-cash write-down of asset values. However sales were up 29% at £21.4bn, and the company still boasted a stronger balance sheet than any of its competitors, with debts well-covered by assets. During 2002 the group began the daunting task of consolidating its mammoth portfolio of different brands. The Vodafone brand name was gradually rolled out to the various wholly controlled subsidiaries around the world, while efforts were stepped up to buy control of other part-owned businesses. France proved the difficult market. Vodafone bought out Vivendi's share of their loss-making multimedia joint venture Vizzavi in 2002, but attempts to capture a controlling shareholding in SFR and Cegetel were continually blocked by the French group. In Japan, Vodafone steadily increased its holding in J-Phone and Japan Telecom before merging them and selling off the fixed line business (as Japan Telecom). In a similar process the group steadily bought out its partners in a series of other markets, including Spain, Sweden, the Netherlands, Portugal and Greece.

Having successfully built Vodafone into the world's biggest mobile phone company Chris Gent stepped down as CEO in July 2003, although he retained the title of life president. Meanwhile the group strengthened its hold on its UK customers, absorbing two service suppliers, Project Telecom and Singlepoint. However performance slowed considerably over the following two years. Incoming CEO Arun Sarin attempted to stamp his authority on the business by removing several directors associated with his predecessor. However the announcement of huge impairment losses for 2006, as well as widespread rumours of simmering tensions within the executive team, provided a catalyst to growing dissatisfaction among shareholders over the group's sagging share price. Following Sarin's removal of marketing director Peter Bamford, press reports suggested that Chris Gent had become the focal point of a "whispering campaign" within the boardroom against Sarin. Gent strongly denied this and resigned his position as director and life president of the company. Chairman Lord McLaurin moved quickly to attempt to dispel concern, putting his full support behind Sarin and denying any boardroom rift. However the pressure continued through the summer, and Sarin narrowly survived an attempt to vote him off the group board at the Vodafone AGM. McLaurin stepped down as group chairman in 2006 and was replaced by Sir John Bond, former executive chairman of HSBC. Arun Sarin stepped down as CEO of Vodafone at the end of July 2008, and was replaced by Vittorio Colao, previously CEO, western Europe and deputy group CEO.

During 2007 Vodafone was shut out of deals to offer exclusive access to Apple's iPhone handset in key European markets, although it attempted unsuccessfully to challenge the deal agreed in Germany between Apple and T-Mobile. The following year, however, the company was able to secure rights to offer iPhone in several other countries including Australia, Italy, India, the Czech Republic and South Africa. Later, Apple lifted its exclusivity contracts allowing Vodafone to supply the iPhone in all its markets. See full profile for current activities

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