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New Vodafone CEO Needs ‘Safe Pair of Hands’ for Deals, Rivalry

Joe Mayes
Nick Read, chief financial officer of Vodafone, poses in this undated handout photo released to the media on Tuesday, May 15, 2018.

Vodafone Group Plc’s choice of Nick Read as its next chief executive officer suggests the board is looking for more of the same for one of the biggest jobs in European telecoms.

Read, a long-time deputy of current CEO Vittorio Colao, will take over in October after four years as CFO and having previously run Vodafone’s emerging markets and U.K. divisions. An accountant by training, Read joined Vodafone in 2001 following senior finance roles at UBM Plc and FedEx Corp.

Read faces big tasks as he takes on the top job, though Colao’s pending deals with Liberty Global Plc and Idea Cellular Ltd. mean he’s not starting from scratch.

“With the Liberty deal announced and India set to close, he leaves behind a strategically well-positioned portfolio for his successor,” said Dhananjay Mirchandani, an analyst at Bernstein, in a note.

Here are the largest files inherited by Read, a “safe pair of hands,” according to Mirchandani:

1. Complete Liberty Global

Top of Read’s agenda will be completing Vodafone Group’s $22 billion acquisition of German and Eastern European cable assets from Liberty Global. If the deal survives scrutiny from European regulators, Vodafone will be a big step closer to Colao’s vision of a European cross-border champion that can offer mobile and broadband services in numerous markets.

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On the bottom line, Read will have to deliver the savings benefits of the deal: Vodafone values cost and investment synergies at 6 billion euros ($7.1 billion).

Colao, in a briefing with journalists, suggested that completion of the Liberty Global deal leaves Read with options to do others.

“There are things we’ve put on the fridge while we’re baking the big cake,” Colao said, referring to the Liberty Global deal. “Now the big cake will be baked, we will look into the fridge, take something out and put it into the oven. There’s always something you can do and improve. Not of the same size, of course. Life continues. New ideas will come.”

2. See India Through

Vodafone is on the brink of completing a merger with Idea Cellular Ltd. to create the largest telecoms provider in India. Colao spent at least $6.5 billion since 2011 to get full control of its Indian unit, but Read will have to decide what to do with Vodafone’s 45 percent stake in the merged entity.

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Vodafone’s bet on India has been costly, marred by write-downs and a $2 billion tax dispute. A scathing tariff war stoked by the entry of Reliance Jio Infocomm Ltd. is clouding the prospects for profits in the world’s second-largest mobile market and the deal with Idea is seen by investors as a prelude to a likely exit.

3. Sort Out the U.K.

Vodafone’s U.K. business has under-performed relative to its continental European operations and the carrier lacks a significant broadband arm relative to the size of its wireless unit. In November, CityFibre Infrastructure Holdings Plc signed a wholesale deal with Vodafone, sidestepping a relationship with BT Group Plc to sell fast broadband services. Vodafone could acquire Liberty’s Virgin Media cable business or alternatively sell its U.K. business to Liberty. In March, Read said he was satisfied with Vodafone’s existing strategy in Britain.

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4. Stay Competitive in Europe

Vodafone has been hit by strong competitive pressures in Spain and Italy. In the former, Vodafone has struggled with Masmovil Ibercom SA, the country’s fourth-largest operator, which has chipped away at the lower end of the market with simpler and cheaper packages.

In Italy, Xavier Niel’s Iliad SA is poised to kick off operations this quarter, where it aims to replicate the success it had in France with inexpensive fixed-line and mobile-phone services. Read will need to stay competitive with Vodafone’s bundle of offers to maintain sales growth.

5. Digitize Vodafone

Colao leaves Vodafone as it tries to improve its digital interactions with customers, a task facing most European carriers and one that according to TM Forum Chief Analyst Mark Newman is all too often driven by hierarchical, slow and risk averse organizational structures. According to a recent Ericsson AB report, consumers expect telecom service providers to match leading digital consumer experiences offered by the internet giants of the world. Smartphone users now expect the same hassle-free, one-click digital experience from carriers.

Read will look to continue Vodafone’s digital transformation project, ranging from using chat-bots to handle customer queries to strengthening the its smartphone app. The company was fined 4.6 million pounds in 2016 for breaches of consumer-protection rules, including having insufficient processes to adequately deal with complaints.

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