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Anthony Hilton: Vodafone investors paying the price for years of drift

Anthony Hilton
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Anthony Hilton: Vodafone investors paying the price for years of drift

Vodafone used to be one of our great companies, one of the global leaders, present in most of the world’s major markets. Its sponsorship of sporting events made it a household name. In 2000 its shares topped 400p at a time when it was bidding for and subsequently acquired Mannesmann. That was 19 years ago.

After Tuesday’s results its shares were around 130p, just a third of what they were.

Particularly from about 2013, when it did its deal to sell its American subsidiary to Verizon for an astonishing $130 billion (£101 billion), it has stood still or gone backwards: locked in its time warp, not innovating, not designing, not really doing anything when compared with how it used to be.

Then this week it slashed its dividend by 40% and even had the gall to say that, with this cut, its dividend yield was still above the average.

On that basis it should engineer to halve the share price again. The dividend would then rise pro rata and justify another cut!

Mind you, while the PR spinners stripped out the M&A and other nasty stuff so the group could say it was more or less on target, the reality was that it lost €7.6 billion (£6.6 billion), so it may not be so fanciful.

Everyone has a mobile phone, if not two, but calls and texts are not where it’s at these days. It has not been so for a while. People use their phones to get access to WhatsApp, and Instagram, Twitter and Facebook; they look at emails; they surf the net; they play games; they might even still Skype.

But that does not really help Vodafone. Its revenue was down a few points, and it said increased competition from lower-cost rivals was part of the problem. That sounds like BT — it too is a legacy business struggling to grow.

Vodafone missed out on social media when, had it been more astute, it might have been part of it, not just providing the network.

Or it could have become a payments provider — it had the customers, a lot of the technology, billing, and payment systems. Instead it left it to Google, Apple and the Chinese. Or it could even have done 5G rather than leaving that to Huawei, the Chinese company which barely existed 20 years ago.

Huawei now apparently has mobile operators eating out of its hands, presumably because it innovated — albeit Donald Trump is not one of its fans. Why didn’t Vodafone stay in the race? Instead it will shortly be rolling out a 5g spectrum, which it says will be wonderful provided Huawei is its supplier. If it is not, then chief executive Nick Read says it will be two years before Vodafone can source someone else.

The point is not that it could do all these things, but perhaps it should have tried at least one. Instead it shuffled the pack, bought some operators and sold others, with last year’s “must have” acquisition this year’s unwanted disposal.

It has for example effectively given up on India, having put billions in it. That is one of the reasons for this year’s vast loss.

Some say it is the fault of Vittorio Colao, who vacated the chief executive’s job last autumn. Colao seemed to be good at his job though; he certainly talked a good story, and the board seemed happy to shower him with options, Ltips or whatever other remuneration package they thought of. But in the event he mostly did costly acquisitions, including part of the present one where John Malone has agreed to sell to Vodafone Liberty Global’s German and east European cable business for an eye-watering €18.4 billion.

Malone has a habit of selling right at the top — no one ever seems to get the better of him — but in the meantime the Vodafone board cannot pay its dividend.

It is a terrible indictment, made worse by the so-called savings which are supposed to come through to help justify the price paid. What savings? Better not bank them just yet.

It is sad but so many British boards just can’t hack it. We go on about corporate governance, board evaluation and having the right skills for directors, but so often it is just words.

Did anyone really challenge the executives? Did anyone resign because of the mergers and disposals? Did anyone really understand technology? Did anyone realise the company was getting more and more in the mire? Did the board think about the dividend and what a cut would mean to shareholders?

Of course not.