Is it a big bully in the world’s biggest markets? Or is it an incubator for nascent carriers in the world’s emerging markets? No, it’s a headless chicken. 

Vodafone. Do you laugh? Or do you cry? More importantly, do you care? You might – if you are a Vodafone shareholder. But then you’d be crying already if you were one of those poor souls.

As I write this I am self-censoring so as to delete the expletives (four in the first line) that surround this undoubtedly big, sometimes wonderful but plainly stupid company (for the record, that’s another three deleted expletives in that bit).

Vodafone is in the middle of a mid-life crisis. It is now out of its depth as the wireless market shifts gear. It darts hither and thither, but strategy seems to have been expunged from the back of the loosest of cabooses.

Vodafone’s tipping point (oh how I hate that phrase, and that’s another two expletives deleted) was the purchase of 10% of India’s BTVL (with a total of 14mn subscribers) and its subsequent sale of 100% of Vodafone Sweden (1.5mn subscribers) to Telenor. Critics said that Vodafone paid too much for too little in BTVL, and gave away too much for too little in Sweden.

Yes, that’s the type of abuse that incumbents are used to: but Vodafone was never an incumbent. It is now.

The fact is that Vodafone has shifted course. On 04 November it splashed US$2.4bn to acquire 15% of Vodacom, taking its holding to a near-majority 50% in the South African operator. On 13 December, it chucked US$4.55bn at Telsim of Turkey. ROI? Don’t hold your breath in either case.

Vodafone, if you look at what they are doing, has a strategy for growth. It involves investing in markets with potential and divesting its interests in those places where either the company or its brand does not hold sway.Yet it is fudging this, too: it retains lacklustre stakes in operators in the US and Japan, both of which should have been filed under ‘get rid’ two or three years ago. Its newfound enthusiasm for developing markets is crass. Its complacency in its core markets – UK, Germany, Spain, etc – is what you would expect from an incumbent. Flat growth leavened by regulatory whining.

In its home market, in regulatory terms, Vodafone seems set to be put to the sword. A long-simmering battle with Floe Telecom over GSM gateway services has now headed to the Competition Appeals Tribunal. The latest CAT transcript, which appears to have been rushed out at the behest of one or other party, offers no succour to the UK mobile ‘incumbent’: “So what is troubling us in this context is Vodafone’s submission that they relied on the law to cut off Floe. Also, we are troubled by the fact that Vodafone entered into the Agreement with Floe on 12th August 2002 because it would seem to us, on Vodafone’s case that at inception Vodafone were potentially committing a criminal offence or, at least, had advice from Mr. Flynn [its pocket lawyer] on 21st August 2002 which highlighted a competition law problem. In this regard we have not been given the instructions to Mr. Flynn or the complete advice so we do not have a complete picture of the surrounding circumstances in relation to the acquisition of that opinion. We note that the advice concerns the ‘GSM Scheme’, and we do not know what that relates to.”

OK, that all sounds rather arcane. It does get better, however, as the clueless CAT says: “It seems to us that the submissions which are addressed to these issues may not address the key question concerning the licence. What is troubling us regarding Ofcom and Vodafone’s submissions on the scope of the licence is whether the licence is properly to be regarded as a licence authorising the use of GSM radio frequencies by Vodafone rather than as a licence of specific equipment. We note that Article 5 of the Authorisation Directive contemplates the licensing of radio frequencies. It makes no reference to the licensing of specific equipment which uses such frequencies. We are wondering what significance this has for Ofcom's new interpretation of the Vodafone licence.”

Analysts, analists and lawyers might find this language sexy but the fact is that another dagger of Damocles hangs over Vodafone. It will get full-blown in January 2006. Yet all Vodafone has done in response is too imply the existence of a strategy, rather than execute one.

What is Vodafone? Incubator or incubus?
Vodafone has flabbily failed to come clean on its growth strategy. It’s a very fat and happy 20th century cellular company but the bad news is that, last time I checked, it’s the 21st century now.

So break Vodafone into manageable pieces. Sell the UK (and Irish) bits to BT. Sell the German and Spanish bits to Orange. Create ‘new Vodafone’ around the emerging market investments – sure to generate a fantastic return if managed by the right people. Get rid of the Japanese and American detritus: those cost-eating stakes might attract a price premium from long-term partners or backers. Put the remaining non-homogenous cellular houmus into a sump company. Call it 'Vodafone'.

‘Vodafone Flab’ might be a good name for its fatty deposits in Europe. The company’s withdrawal from sponsorship of iconic brands such as Ferrari or Manchester United suggests it too is looking that way, or any way, for a change of direction.

Somewhere inside, there is a decent company trying to get out. No bloody (oops!) sign of it yet.
Jim Chalmers