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Vodafone split its emerging markets business into two units and hires a new CEO for Europe

Colao Revamps Vodafone Team

Michelle Donegan
LR Mobile News Analysis
Michelle Donegan
9/9/2008
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Vodafone Group plc (NYSE: VOD) unveiled a major restructuring of its emerging markets business unit and hired a new CEO for its European businesses in a bid to spur growth.

After just six weeks into his new job as CEO of the world's largest operator by revenue, Vittorio Colao has wasted no time in introducing sweeping changes and positioning the operator for better growth than it has reported so far this year thanks to the slowing global economy. (See Vodafone Wobbles on Outlook, Carrier Scorecard: Vodafone, and Sarin Steps Down as Vodafone CEO.)

Vodafone has appointed Michel Combes, a former head of finance at Orange (NYSE: FTE), to become CEO of Vodafone's Europe region. The operator also revamped its emerging markets business, splitting it into two distinct units: one covering the Asia/Pacific region and another for the Central Europe and Africa regions.

As part of this restructuring, Vodafone also hived off its 45 percent stake in Verizon Wireless , which was previously part of the operator's emerging markets business unit, so that it can be managed directly by Colao, CFO Andy Halford, and Terry Kramer, the newly promoted group strategy and business improvement director.

The change in the management structure of Vodafone's holding in Verizon Wireless may well spark renewed speculation about whether Vodafone is preparing to sell off its stake in the U.S. mobile operator. But Verizon Wireless accounts for about 25 percent of Vodafone's adjusted operating profits, which is value that Vodafone is not likely to want to give up easily. (See Vodafone Plans LTE Powwow.)

Tough job for new Euro CEO
Vodafone's most difficult area at the moment is its Western European operations, which is the biggest part of the operator's business, accounting for 75 percent of revenues. Among these saturated markets, revenues are falling in key markets like Germany and Spain, even though mobile data revenues are growing at around 50 percent year-on-year.

To take charge of this troubled business, Vodafone has hired Michel Combes, a former head of finance at France Telecom, to become CEO of Vodafone's Europe region, the position previously held by Colao. (See NextNet, MVS Deliver VOIP and Carriers Under Siege From EC.)

Combes, whose name was recently in the frame to take over the top job at Alcatel-Lucent (NYSE: ALU), will start his new job on Oct. 1. He will arrive at Vodafone with expectations for cost cutting and cash generation, which is just what's needed in Vodafone's European operations.

While at France Telecom, Combes led the operator's own transformation project, dubbed NeXT (New Experience in Telecom Services), through which the French incumbent launched its converged services strategy and consolidated its international branding strategy with the Orange brand. (See Who Will Replace Russo? and France Telecom Launches NExT.)

After leaving France Telecom in 2006, Combes has spent the last two years at private-equity back TDF Group, which operates shared facilities and terrestrial networks in Europe.

Vodafone's Colao said in a statement: “I am pleased that we have recruited someone of Michel’s talents and expertise. I am confident that he will bring significant experience to Vodafone, given his impressive telecoms and entrepreneurial background.”

Emerging market revamp
Amidst at these changes, Paul Donovan, Vodafone's CEO of its EMAPA region (Eastern Europe, Middle East, Africa, Asia Pacific and Affiliates) announced his resignation today and will leave the company at the end of the year. Vodafone has taken Donovan's division and split it into two units: Central Europe and Middle East, and Asia/Pacific, for which the operator said it will look for two regional CEOs.

The new regional units will better reflect Vodafone's strategy. In the Asia/Pacific, for example, Vodafone will look to build relationships where new markets are opening to competition. This business unit will comprise Vodafone's operations in Australia, New Zealand, India, and its 3 percent stake in China Mobile Communications Corp. (See China Mobile Joins LTE Threesome.)

The Central Europe and Africa unit will house Vodafone's businesses in Poland, Romania, Egypt, Kenya, Ghana, and South Africa. This is the region where Vodafone is looking to increase its presence in a big way. Vodafone just paid $900 million for a 70 percent stake in Ghana Telecom and the operator is still in talks with Telkom SA Ltd. (NYSE/Johannesburg: TKG) about gaining a majority shareholding in Vodacom Pty. Ltd. (See Vodafone Turns Attention to Poland and Vodafone Buys Into Ghana for $900M.)

— Michelle Donegan, European Editor, Unstrung

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