BREAKINGVIEWS - Vodafone strength is mixed blessing for new chair

Thu Feb 3, 2011 10:18am IST

Related Topics

-- The author is a Reuters Breakingviews columnist. The opinions expressed are her own --

By Una Galani

LONDON (Reuters Breakingviews) - Vodafone's strong share price is a mixed blessing for Gerard Kleisterlee. The outgoing boss of Dutch electronics group Philips takes the chairmanship of the telecom giant just as its shares near a high last enjoyed in 2007, and when concerns about its sprawling portfolio are already being addressed.

The question is how German-born Kleisterlee can help the board drive even more value for shareholders.

Kleisterlee's appointment is unlikely to herald a major strategy shift for Vodafone despite the huge transformation he led during his decade at the top of Philips. Under current chairman, John Bond, and amid pressure from activist shareholders following a wave of write-downs, Vodafone has stopped buying and recently starting selling.

The strategy to dispose of minority interests is the right one for the 148 billion pound ($239 billion) group.

Since the middle of last year, Vodafone has already sold its 3.2 percent stake in China Mobile for $6.6 billion and debt instruments in Japanese operator SoftBank for 3.1 billion pounds.

Investors expect that will soon be followed by a disposal of its 44 percent stake in French operator SFR to partner Vivendi which could be worth eight billion pounds and its interest in Poland.

With no strategy to ditch or balance sheet to kitchen-sink, Kleisterlee will have to work hard to make his mark. His first test will be ensuring that Vodafone secures a good price for assets that are already on the block.

The knottier task is how extract value from Vodafone's lucrative U.S. joint venture, Verizon Wireless -- either by ensuring its partner resumes dividend payments in 2012 as widely expected, or finding another solution.

Once the tidy-up is done, the big strategic question will be how Vodafone maximizes the growth potential of data traffic.

Investors have been keen to see a new chairman at Vodafone, blaming its outgoing one for destroying value. The boardroom wasn't always the most harmonious place either, although it has been a while since the last spat.

But under Bond's five-year tenure, Vodafone has generated a total shareholder return of 94 percent, according to Datastream, equivalent to an annual return of 14 percent.

Global rivals Telefonica and Deutsche Telekom have performed less well over the same period. That suggests Bond deserves a little bit more credit and that Kleisterlee will have his work cut out to achieve the same.

CONTEXT NEWS

-- Vodafone named outgoing Philips chief executive Gerard Kleisterlee as its new chairman, succeeding John Bond.

-- German-born Kleisterlee has spent his entire career at the Dutch lighting, healthcare and consumer electronics group after joining the group in 1974.

-- More than 6 percent of Vodafone shareholders voted against the re-election of Bond at the company's last annual general meeting holding him responsible for group's acquisition strategy.

-- Kleisterlee will replace Bond on April 1, 2011. Bond became chairman of Vodafone in July 2006.

(Editing by Chris Hughes and David Evans)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Iron Ore Mining

REUTERS SHOWCASE

Tracking Markets

Tracking Markets

Sensex, Nifty surge to record high; Sesa gains  Full Article 

Rupee Falls

Rupee Falls

Rupee sees worst single-day fall in over a month  Full Article 

TCS-Mitsubishi

TCS-Mitsubishi

TCS, Mitsubishi to form software services company  Full Article 

Deal Talk

Deal Talk

Hero Motor to invest $40 million in Bangladesh joint-venture   Full Article 

Telecom Sector

Telecom Sector

RIL telecoms unit in tower lease pact with ATC  Full Article 

Japanese Economy

Japanese Economy

Japan exports growth slows sharply, keeps pressure on BOJ to act  Full Article 

A Tough Sell

A Tough Sell

Insurance against a China financial crisis  Full Article 

Tyre Debris

Tyre Debris

Bangalore-bound Malaysia Airlines plane turns back after tyre burst on takeoff  Full Article 

Digital Currency

Digital Currency

At Mt. Gox bitcoin hub, 'geek' CEO sought both control and escape  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage