E]n

Newbury, England-based vodafone Group pLC (vodafone), formerly known as vodafone

AirTouch, was the world's No.2 wireless phone service provider (by subscribers), with
more thar 133 million subscribers trailing behind only china Mobile of Hong Kong
-
(Exhibit I). Christopher Gent, the CEo of rhe company for nearly seven years (1991-2003),
transformed an unknown British wireless startup into one of the world's biggest mobile
phone operators through acquisitions and holding stakes in many companies across the
world. One of the major acquisitions of the Group was AirTouch Communications in 1999,
which was the largest mobile phone operator in the US. vodafone merged AirTouch
Communications withVerizon Communicationsz to form Verizon Wireless, in which Vodafone
held a 45Vo stake, and Verizon Communicati ons, 55To.After the merger, Verizon Wireless
went on to become the No.l wireless provider in the US.3

In early 2000, in what was then considered as the biggest takeover in history, vodafone
acquired Germany's Mannesmann AG, which was the No.l network provider in Germany
and the No.2 network provider in Italy for $ 183 billion. The company also owned stakes
in
wireless carriers in several other European countries, including France, the Netherlands,
and Spain- But in early 2001, the company encountered difficulties in integrating the
operations of the acquired companies. The telecom bust added to the woes, and the company
posted losses year on year. The company incurred losses of
$19.3 billion for the financial
yeat 2001(the highest loss in British corporate history), compared to losses of
$13.8 billion
in 2000. In 2003, Christopher Gent stepped down as the CEO, and handed over the reins to
Arun Sarin, who was earlier the chief operating officer of AirTouch, and the chief executive
of the private equity finn, Accel-KKR Telecom. The new CEO also continued to expand the
operations of the company through acquisitions. He unveiled 3G services in Germany,
Italy, Portugal, and Spain, and arso pianned to expand the operations of the company in
countries iike India and Russia. But the shareholders felt that as the company was posting
losses (net lossof $16 billion for the financial year 2003), it should not go for furrher
acquisitions. They also added that the company was cutting their dividends in order to
pursue its acquisition plans.

' Goodway. Nick "Vodafone's f3bn for investors,,, www.thisismoney.com. May Z5k
?004
I Verizon Communications was fomed when Bell Atlantic merged with CTE.
t www.hoovers.com

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The f,orly Doys

In I982, Gerald Whent, chairrnan o1'the Racal Radio Group, convinced the Racal Electronics
Group Board to bid lirr the privare sector UK cellular network license being ottered by the
UK governrrent. He masternrinded the successful bid and set up the Racal Teleconr Lirnited
to develop and inrplenrent the analogue oTTACS (Total Access Conlr.trunication Systenl)
network. Racal Teleconl Linrited was lorrred in 1983 as a joint venture between Racal
the conlpany
E,lectronics Group and Millicom (a US telecorn company). Based in Newbury,
employees, inhabiting one buildirig. Tlre company was granted one of the
had less tlran 50
in UK (Cellnet was the other licensee). The Vodatbne analogue
two mobile phone licenses
network was launched on January l" 1985, and the first call was ntade fr-om St Katherine's
it
Dock in London to Newbury. It was the first cellular network to be launched in tJK- and
received an overwhelming response. But as the network was prohibited fronl selling services
directly to the public, the Group tbrrned a wholly-owned subsidiary called Vodac in 1984 to
act as the service provider for the network. By the end of 1985, the company had added
19,000 customers to its portfolio.r

In 1987, Racal Telecom Limited was recognized as the largest mobile network in the world'
During the same period, Vodata was created as the "voice and data" business to develop
and market the voicemail service of the company called Vodafone Recall. Vodapage,
which
was launched to provide a paging network, covered 80% of the UK population. ln October
1988, approximately 20Vo of the company was offered to the public on the London and New
york Stock Exchanges. Racal Telecom Limited accounted for a third of Racal Electronics
Group's profits for the year. The followin,g year, network coverage and capacity continued
to increase. Paknet, the radio data network company, was formed as a jojnt venture betu'een
Racal Telecom Limited and Cable & Wireless.'

In early 1991, Racal Telecom Limited was awarded the British Standard Award for Quality,
the first such award to be siven to any telecomgrunications company in UK- ln September
199 I, Racal Telecom Limited fully demerged from Racal Electonics Group
(considered then

as the largest demerger in the UK corporate history) when the remaining shares of the
company were issued to the public. The company became an independent entity and
changed irs name to VoCafone Group PLC. Vodafone stood for VOice-DAIa-FONE. In the
same year, Vodafone launched its GSM (Global Systerr for Mobile communications)
digital
network - rhe first in IJK. tn l99L.Vodafone and Te]ecom Finland signed the world's first
internatiolal GSM roanting agreemenl. The company also introduced new tariff initiatives
for the consuner market. LowCall, a low user tariff, offered a reduction of 407o on the
existine btrsiness tariff. During the same period, the cornpany also bought tlie remaining
507o of Pakner frorn Cable & Wireless, and consolidated Paknet into the Group as a wholly-
owned subsidiary.
Tlll \ggL,Vodafone joint venture of British Telecolll (later nanred BT Group)
and Cellnet, a

and Securicor, had enjoyed a duopoly in UK. Regulatols had decided not to irrlpose llrice
controls, and the cotrrpanies generated very high profit rnargins. But in 1993. a new wireless

www-voda1_onc.cottr
I hid.
 provider' one 2 one. launched a digital network
in London. with the increase in competition,
vodafone moved beyond UK in the 1990s. By 1993,
it had expanded its interests in mobile
phone networks in Australia, Greece, Hong
Kong, Malta, and Scandinavia. vodafone
continued to expand in 1994, and bought siaLes
i-n companies in Fiji, Germany, South
Africa, and Uganda.6

Acquisitions - The Growth Sirotegy

on January l" 1997, christopher c. Gent (Gent) succeeded

Gerald whent as the chief
executive officer of vodafone. Initially, Gent trimmed
down the six wholly-owned service
providers to three * Vodafone Corporate,
Vodafone Retail and Vodafone Connect. He started
focusing on increasing the company's presence
in other countries. He believed that mergers
and acquisitions could. help the to gain foothold in the overseas markets. By
"o*pury
1997' vodafone had stakes in l4 other mobile ciriers, controlling several of them, including
operators in the Netherlands, Australia, South Africa
and Sweden. In 199g, vodafone sold
its French subsidiary, vodafone SA, and bought digital
cellular carrier Bellsouth New
zealand. The company expanded into Elypt by buying a 30vo stake in
.also Misrfone,
which was the largest British investment in Egypt since the investment in the
Suez Canal in
the l9th century.

In the late 1990s, with the increase in the number of

mobile phone users, most of the
network and service providers followed the acquisition
strategy to .*fura ti,"ir businesses.
In early 1999, vodafone decided to bid for the largest
US moulie prrone operator, AirTouch
Communications' At that time, San Francisco-based
AirTouch communications had two
offers:

' $48 billion offer from the largest regional phone company
in the US, Bell Arlanric (later
renamed as Verizon); and

' $55 billion offer from the Britain's biggest mobile phone
company, vodafone.
By that time, vodafone and AirTouch communications
were business partners in Egypt
and Sweden, and co-operated on Globalstar, a
satelrite-based mobile phone system. Towards
the endof 1999, vodafone succeeded in buying AirTouch commurications by increasing
its offer to $66.5 billion -
considered then as the biggest cross-border merger
deal in
history. Analysts opined that vodafone was paying
a high price for the merger, but the
company executives felt that through the deal, the
company could enter into the lucrative
US mobile phone market.

The merger immediately added about 8.5 million

US subscribers ro vodafone,s portfolio.
The company was renamed as vodafone AirTouch,
and Gent took over as cEo of the new
company. vodafone AirTouch became the world's
largest ceilular phone company with
combined sales of over$10 billion. It had amarker capitalization
ot$t tO Uittion, making it the
third-largest company uJLvu
listed vrr London'ss rrJE
on Lurruu, FrsE luu
100 lnoex,
index, reachrng
reachi nearry one biilion
people in 23 countries across four continents.T
on Septembe r 2t" tg9g, Gent signed an
www.hoovers.com
"The Conrpany File Manrrloth mobile merger',,
www.ncws.bbc.co.uk, January lg,h I999
agreement with Bell Atlantic to combine both conrpanies'wireless netwttrks in thc US.
They were marketed under a single brand, Veriz.on Wireless, in which Vodalirne AirTouch
owned a stake of 45o/r'.
In late 1999, Vodatbne AirTouch decided to rnake an aggressive takeover bid tbr the Cernlan
group, Mannesmann. lt all began with the acquisition of AirToLrch Communications by
Vodafbne" Through the acquisition of AirTouch Cornmunications, the company had inherited
stakes in Cegetel's mobile network and D2 (AirTouch had stakes in Cegetel and D2), and
thus became an indirect business partner of Mannesrnann. In early 1999, the two conlpanies
(Vodafbne AirTouch and Mannesmann) had plans to merge. Tl.re two companies also
discussed about the partnership interests and fufther growth opportunities" But on October
I9'h 1999" Mannesmann announced its plans to acquire Orange PLC (Orange), Vodatbne
AirTouch's major competitor in the UK. Klaus Esser (Esser), the CEO of Mannesnlann,
viewed Vodafone AirTouch as a threat because it already owned a stake in Germany's third-
biggest mobile phone company, E-Plus, which in furn was a conrpeiitor to Maunesmann in
Germany. Esser felt that Vodafbne AirTouch could noi simultaneously own stakes in
competitors D2 and E-Plus.
Also, Esser felt that it would be better for Mannesmann to enter Britain in partnership witll
Orange than with Vodafone AirTouch. But, Orange's 45olo shareholder, Hong Kong-based
Hutchison Whampoa Ltd., did not want to sell its stake. However, in October 1999, Esser
flew to Hong Kong and met Li Ka-shing, who controlied Hutchison Whampoa Ltd. through
his Cheung Kong (Holdings) Ltd. Esser convinced Li Ka-shing thal he could make more
money as a Mannesmann shareholder and offered a price that was too tempting to refuse:
$33 billion in stock, cash, and assumecl debt. Eventually, Li Ka-shing accepted Esser's
proposal.s Consequently, Hutchison Whampoa Ltd. acquired a l0% stake in Mannesmann.
According to the cleal, Hutchison Whampoa Ltd. was committed not to dispose its stake in
Mannesmann for a period of l8 months unless the Mannesmann board recommended thern
to do so, or unless there had been a change of control.
Meanwhile. Esser also refused to meet the executives of Vodafone AirTouch as he had
already signed a deal with Orange. A11 this came as a shock to Vodafone, whose executives
were under the notion that if Mannesmann decided on a merger, Vodatbne would be its
partner of choice. But, Mannesmann became a competitor to Vodafone AirTouch or.t
Vodafone's home turf. Moreover, by that tirne, Vodafone AirTouch had sold its stake in
E,-Plus to France Telecom. So, Gent hired Goldman Sachs to act as financial advisor to
mount a hostile takeover bid for Mannesmann. Initially, Gent offered a fi'iendly buyout o11-er
of 43.7 Vodafone Airtouch shares for one Mannesmann share. But Esser refused the
proposal. On November 15'h 1999, Esser filed an injunction in the UK High Court to block
Goldman Sachs from advising Vodafone AirTouch on the deal. He averred that Goldntan
Sachs had the confidential infomatior.r about Mannesmann's financial state. as Mannesmann
was the client of Goldman Sachs in the past. But on November I Sth 1999, the court disrnissed
the plea.

Ewing. Jack et al "Can Mannesmann Wr irrle Away'?'. www.businessweek.com. Jaruary I 7'r' 2(XX)
After the Mannesmann management rejected the bid, Vodafone AirTouch addressed its
offer directly to the Mannesmann shareholders. On November 19th 1999, Vodafone AirTouch
announced a revised offer of 53.7 Vodafone Airtouch shares for one Mannesmann share.
But the Mannesmann executives advised the shareholders to reject the offer. However,
when it became clear that Vodafone's attempt of hostile takeover might succeed, the
Mannesmann management changed its strategy and agreed to negotiate the terms for a
"friendly takeover" in February 2000. The final agreement was based on an improved offer
for Mannesmann shareholders to exchange their shares in the ratio of 58.96 Vodafone
AirTouch shares for one Mannesmann share.e
By the end of February 2000, Vodafone AirTouch closed its $183 billion buyour of
Mannesmann, the biggest takeover in history (Exhibit II). The new company was called
Vodafone Airtouch, although the Mannesmann name was retained in Germryry. Vodafone
AirTouch spun off Mannesmann's engineering and automotive operations into a separate
company. The new company was operated from Vodafone's Newbury headquarters, although
Mannesmann had its head office in Dusseldorf (Germany). The total value of the Vodafone
Group on the stock market, after payiag $ 1 83 billion for Mannesmann in shares, was $365
billion, making it the largest company on the London Stock Exchange and the fourth largest
in the world.ro
With the acquisition of Mannesmann, Vodafone AirTouch had 42.4 million mobile phone
customers spread over 25 countries, including the US, Germany, Britain and Italy. Vodafone
AirTouch became one of the top three wireless players in Germany. Frank Wellendorf, a
telecommunications analyst with Westdeutsche Landesbank, said, "The acquisition gives
Vodafone huge opportunities to compete against rivals. With systems in so many countries,
Vodafone will also be able to offer customers attractive rate packages for using mobile
phones in several countries. Mobile phone users now pay steep surcharges when they
'roam' from their country of residence. clearly, vodafone is in a very good position in
comparison to other mobile operators."rl
In order to improve profits, Gent divested the non-core businesses that he inherited with
the acquisition. Mannesmann had assets from watchmaking to steel tubes to fixed-line
phone services like Italy's Infostrada. Gent sold the non-core assets of Mannesmann and
raised more than $13 billion. In addition, the company also sold Orange to France Telecom
for $40 billion. Verizon Wireless, Vodafon e's 45Vo owned venture in the US, offered lTVo of
its stake to the public that enabled the company to raise about $10 billion for Vodafone.
Besides, one of Gent's main challenges was to popularize vodafone's brand, which was not
widely known outside Britain. Gent appended Vodafone's name to many of the businesses
that the company controlled: Omnitel in Italy was called Omnitel Vodafone; D2 in Germany
was called D2 vodafone. Moreover, the company also planned to move into the Asian
market. The company boughta2To stake in China Mobile for $2.5 billion. The company also
changed its name from VodafoneAirTouch to Vodafone Group pLC.

e "Mannesmann agrees on friendly takeover by Vodafone,,, wwweiro.eurofound.eu.inl

r') "Vodafone seals Mannesmann deal", wwwnews.bbc.co.uk, Februuy Il'h 2000
rr Wallace, Charles P "Vodacious", www.time.com, Februry 14,r, 2000
Furthermore, in rrid 2000, Gent spent $8.7 billion tbr the next-generation mobile phone
licenses in Britain. Gent planned to revolutionize wireless by linking them to the Net. Using
the next-generation rrobile services, the company could not only provide telephone services
but also acted as the Web portal fbr its cell phone customers. Gent envisioned that mttbile
phones could become the world's Web tool, superseding PCs as the device of choice fbr
Internet access. He planned to introduce services that allowed movie and sports clips on
mobile phones. The services also enabled sending video via cell phone through the new
GPRS (General Packet Radio Switching) technology. GPRS delivered rnobile speeds of up to
100 kilobits per second, about the speed of a fixed ISDN line, which was faster than what
most American Internet users had on their home PCs.

It was fbund that laster speeds could be made possible with a technology called 3G (Third
Generation) technology. Gent said, "Even on a two-inch-square scleen, you can get very
good resolution and full color. People will use devices that not only have the ability to
deliver images but have a camera attached to them so that they can send in.rages as well."rr
Vodafone spent $ 17 billion on licenses 1or the radio spectrum needed to build high-bandwidth
networks in European countries, without adding a single customer. Meanwhile, the company
starled working with Vizzavi, which had a joint venture with Vivendi of France, to develop
a portal for mobile phones, PCs, and televisions. The company also partnered with other
Internet companies and content providers such as News Corporation, owners of the Sun,
the Times, and BskyB to help it build its 3G technology.

By the end of October 2000, with a market capitalization of $256 billion, Vodafone had
emerged as the most valuable company in Europe and the seventh most valuable in the
world (Exhibit III). By early 2001 , Vodafone had secured a 15Vo stake in Japan Telecom for
$2.2 billion. With a stake in Japan Telecom, Vodafbne had control over the company's
J-Plrone wireless unit. Japan Telecom owned 547o of J-Phone, the country's third largest
wireless operator, whiie Vodafone had a stake of 26V0. Vodafone considered Japan as an
important market because of the extensive use of 3G rrobile services. In May 200 I , Vodafone
grabbed a bigger piece of the global telecom market by buying British Telecom's interests
in Japan Telecom and the J-Phone Group, as well as Spain's Airtel for a total of $6.93 billion.
In the process, Vociafone became the largest shareholder and sole telecom pal-tner of Japan
Telecom wiLh 45Eo interest, and the J-Phone Group with 467o slake.In addition, Vodafone
acquired about 91 .6Vo stake in Airtel and became the sole telecom shareholder. Analysts
believed that increased ownership in Japan Telecom's wireiess subsidiary offered Vodafone
an increased stake in Japan. The company also gained more exposure to 3G service
development and wireless Internet advancements in Japan. Andrew Cole, principal analyst
at Adventis, said, "Unlike other carriers, Vodafone has been able to continue making
acquisitions. This is one of the reasons that the carrier is leaving the competition behind
and becoming a larger global player."rs

Guyon. Janet "What Does This Cent Really Want'?". www.lbrtune.com. March 6'h 2000
Canoll. Kelly "A global go gel(ea'. www.telephonyonline.con. lr4ay 7'r' 2001

lt.'in:t
 Treading the same path, vodafone also acquired the Idsh phone company Eircom,s mobile
unit,Eircell,for$4.01 billion.TheacquisitionofEircell strengthenedthepresenceofVodafone
in Northern Ireland. Vodafone added more than 1.2 million customers, including a large,
captive market of young people.ra The company acquired stakes in several companies,
which helped it to gain a foothold in major countries of the world (Exhibit IV). After acquiring
a company, Vodafone sold the non-core assets ofthe company. The funds generated from
that were used to finance further acquisitions. Gent's strategy had helped the company to
increase its stakes in mobile phone companies worldwide. In orderto strengthen its foothold
in China, the company invested an additional $750 million in China Mobile, increasing its
stake to 3.27Vo.

The Poyoffs

The company's financial results for the fiscal year 2000 reported losses of $13.8 billion.
Vodafone sources revealed that it incurred a loss as it spent billions blying stakes in
cellular companies worldwide, many of which were not performing well. The company had
issued stock to fund acquisition, which left shares in the hands of entities that did not wish
to hold on to their stakes in Vodafone. About 8.57o of the company's stock was in the hands
of such entities. Analysts felt that this was one of the major factors for the reported loss
incurred by the company. Gent decided to put on hold the expansion plans and did not
issue stocks for that year.15

By 2001, with 100 million subscribers in 28 countries, Vodafone had become No. I or No. 2
in most of the European markets (Exhibit v). However, the company was in a poor financial
state, as its European partners did not generate profits. After their acquisitions by Vodafone,
they started spending on 3G phone license bids and expansion efforts. The telecom bust
also added to the woes of the company. By the end of the fisc alyear2001,the company had
reported a loss of $i9.3 billion, the highest loss in British corporare history (Exhihit VI).
Industry analysts felt that the company was encountering problems because of the
acquisitions it had made at highly inflated prices. Vodafone sources revealed that the
company's losses were mainly due to the revaluation of some of its global assets, including
Japan Telecom, J-Phone, Mannesmann, Arcor, Cegetel and Grupo Iusacell. The company
wrote-down $28 billion in goodwill. The company also faced difficulties in integrating its
operations in different countries. Analysts opined that the company's spending of about
f 13 billion ($23 billion) for acquiring 10 European 3G licenses (to operate the 3G mobile
phones) added to the woes of the company. With the burst of the speculative bubble in the
telecom industry, there was a profit slump and decrease in sales. Like Vodafone, other
telecom giants were also burdened with huge debts, slump in sales and demand dnd
plummeting share prices. In order to regain the profits, Gent planned to introduce new
services.

r! "Vodafone Capping off a Yeu of Acquisitions". www.mobileinfo.com, January 3,d 2001

r! "Vodafone posts 2000 loss". wwwedition.cnn.com, May 29,r, 2001
 267

ln October 2002, Vodafbne unveiled 'Livel'consumer services, its ilrst product under the
brand ol'vodafone Mobile ofllce. Liver was launched in cermany, Ireland, Italy, the
Netherlands, Pofiugal, Spain, Sweden and UK on october z5r, z002.The conrpany presented
a new range of Vodalbne-branded handsets l'rom Nokia, Sharp and Panasonic to its
customers. The handsets featured integrated digital cameras and were customizecl with a
color service menu that off'ered access to games, a unifled mailbox, a range o1'third party
infornration services, polyphonic ringtones and illustrated entertainment, music and sports
news.

However, the new services did not help in posting prolits. The company continued to post i
i
losse s year on year and its share
price was declining (Exhibit vll). on December l g,h 2002,
i
the company sources announced that Gent would step down as chief executive (as per his
previous plans) on July 30'h 2003 and Arun Serin. former chief operating officer ol-AirTouch ii
and chief executive of private equity tim Accel-KKR Telecom, would take over the reins of
Vodafbne.

Furthermore, it was observed that the.olrrrn, had problems in operating in the US market.
Though the company generated revenues from its 45Vo stake in Verizon Wireless. it could
not inlpose either its brand or its long-term plans, as the management was in the hands of
Bell Atlantic. Also, verizon's technology was not compatible with Vodafone's. so when
Vodafone subscribers traveled fiom Europe to the US, they availed the roan.ring facility of
T-Mobile, the wireless competitor owned by Deutsche Telekom. Luiz Carvalho, telecom
analyst at Morgan Stanley in New York City, said, "It is an uncomfortable strategic posiriou
to be in. You are a superbrand globally, but in the US you are nobody." Julian Horn-Smith,
the company's chief operating officer also accepted that Vodafone had problcms in the US
market. He said, "lt is a disadvantage, and it may be an obstacle to creating a global brand.
Many people argue that a global brand isn't global if it's nor in rhe US. Of course we'd like
Verizon to use the Vodafone brand, but we're a minority shareholder, and that's not likely to
change in the future. Is it an ideal situation? No. But we haven'l seen anything better.'!16

Analysts opined that one of the options to make the company's presence stronger was to
seil its stake in Verizon. The company had also put options to sell its stake in Verizon, and
buy another wirelcss operator in the US, Ar&T wireless, the No. 3 player in the uS. The
technology of AT&T Wireless was also compatible with Vodafone- But on the other hand,
no other celh-rlar phone business was as profitable as Verizon in the US. Julian Horn-Sniith
said, "Do we put our brand on a lesser business, or do we stay in a better business? That's
the dilemn.ra. We may have to be content with the brand not being in the U.S. if there is
nothing to increase shareholder value."r7 lndustry analysts predicted that Vodafonc would
sell its stake in Verizon to buy stakes in another American player, over which it could obtain
majority control.

"' (iuyon. Janct "Vodalirue's Dilenrma". www.lbnune.cont,

Mtrrh l7,h 200-l
rr lhid
Arun Sorin - The New CEO

when Arun Sarin (Sarin) took

over as the CEo, he had two
major cha,enges: how to
.o*ouni.,r,-European counrries, and
il.:::::i:1,:::1": :1l,il,'9::,
the company's reven ues * y!, r r,rg" *i*,;;;;|;#""*;ilil how to increase
T.
vodafone's penetration was just
55zo ;, t* ui, .o.pared
ffi J::il_:l:
with over g[voin westem Europe.
Some analysts felt that Sarin had
inherited u',.on,ourr, which was
other industry anarysts opined in good shape. Some
that the rrtur" oi Sarin wourd
success of 3G services. depend on the launch and

Sarin planned to acquire some

more companies to expand vodafone,s
August 2003' vodafone acquired presence in UK. In
the mob,e services provider project
also planned to buy out another Terecom. The company
mobile phone service provider,
the company launched a Singrepoint. rn earry 2004,
$37 billion tateover ila for AT&T
takeover bid by vodafone might
wiretJss. analysts felt that a
anger some of its investors,
who thought that the company
growth ratherLan mon"v-rp"raing
acquisitions arter sarin succeeded
ffE#l[Torganic
vodafone executives were uncertain
about the bid for the sffuggring
buy AT&T wireless, vodafone AT&T wireless. To
wourd have a-r"rr io stake in
billion, back to verizon. It would verizon, worth around g30
then find to"rr t, a bidding war
operator' which had made a cash with cingular, anorher
bid of $30 b,rion forAr&TWreless.
won the bid, the tax bilr associated And even if vodafone
with selring it, v".iron stake and
the premium needed to
outbid cingular wourd add up to $5 bilrioriro
sro b,rion. Bob Hoise of Adventis, a
pay.ro
l"Jli#,|,cj;
a controlling l}l]iT 1,:],"
stake in much
a
minority srake in a very good operator for
sw-11 a
less good one ,,; ,"*G;ffi;;JrirT:#ili::J

r arDu' rl,c -*r*r.,"ss was much less profitable than

c,mpany fTaiFrc-iovest more
to bring Ar&T wireress, network
with the standards of vodafone's
r"*l*\*'.,iercountries. However, vodafone,s on par
the takeover of AT&T Wireless bid for
was aaf*t"d, ur'Cinsulnr rha cann-,{ }.:^_^^+ _,^_., .
uS craimed Ar&r ut.",.,,
strained vodafone's relationship
ffi ;r;#ffi t:ff :1il_d:::::;ii:Iitfffl*:
its strained rerarions with
witrr ve.izon. ri,J.o-o*, *us reft with the task of repairing
i, o.d;;;";;t"inue its American operatrons.2'
verizon
"I'm very hopeful we'll get Sarin said,
a win-win r,t*-, ,, rhe
three years from now' we're nexr 12 mo;ths. ;ighteen monrhs,
going ,o o-"
t""ioartner with verizon wireress.,,2r
In early 2003, vodafone rored
out its 3G services in Germany,
company also expanded the Itary, portugar, and Spain. The
service,s content beyond
download' In February, vodafone music and photos to include video
launched a mouile data card
that enabled laptops to
rf Flanagm,
Matin ,,Vodafone *
re ..vodafone,s wlw.rhescotsman.scotsman.com,
dilemma,,, ,**.;.";;,;::1,]*L,^"_:
w'economistcom. February February 9$ 2004
,) .,who,s *.;;;;;;f,, 12'h 2004
ww'economist.com, February
zr .(\/^r^r^--,-
"Vodafone's l7th zo04
sarin Seeks to Renegodare verizon pact
tuor""rii**.ouore.broomberg.com, February z5,h 2oo*
 at Goldrnan & Sachs
access Vodafone's 3G networks. Simon Weeden, a telecom analyst
technologies into product "2l
Co., said, "Sarin is extremely focused on turning advanced new
future to gain a foothold in
Sarin aiso admitted that some acquisitions might be made in the
countries where Vodafbne lacked presence. He planned to acquire full control of French
He was also looking at
wireless player Groupe SFR Cegetel, from parent vivendi Universal.
investment opporlunities in India and Russia'
Vodafone's annual
In May 2004, the company announced its financial results for 2003.
nearly $28 billion of assets
pretax profits rose by 197o to$ I 8 billion. But after writing down
net losses of $ l6 billion'I
acquired in the heydays of the tech-boom, the company posted
and bought back
The company had spent about f550 million ($ I billion) on acquisitions,
2003 under its f'2'4 billion ($4'4
f I billion ($1.8 biliion) worth of shares since November
felt that the company
billion) buyback programme. on the other hand, the shareholders
The shareholders of vodafone
was keeping the cash for further acquisitions and expansions.
the dividends. They advised the company to
pressurized the company to further increase
and return about $30 billion
sell its stake in American mobile phones firm Verizon Wireless
the company rejected
in cash to them through a special dividend or share buybacks. But
likeabank'by
theproposalot.theshareholders.oneinvestoraccusedtheGroupof'acting
,sitting on cash,in the hope of acquiring 567o of France's Cegetel that it did not own -
them' the
which analysts predicted would cost f 10 billionra ($18 billion) ' Contradicting
a share buyback and
conpany sources said that in May 2004, the company had announced
a dividend hike' The compary had spent 13 billion
($5'5 billion) in buying back its shares'
to our shareholders'"2s
Sarin said, "We remain committed to delivering increasing returns
said, "Vodafone are
Robert Talbor, chief investrnent officer at Isis Asset Management.
fairly inefficiently structured in tenns of their balance sheet and will continue
thel'warrt
to be so for
flexltrility to do
I
the next few years.'I'he argument always comes back that f,,,

somethingacquisition-wiseinFranceorthellS,butnowtheUslooksalotlesslikelyto
happen."r6

June 7'r' 2(X)4

Capell. Kerrl "Vodafone : Is The Shine Wearing Off'?'" www.trusinessweeL.com.
rhid.
protits www.telegraph.co.uk' May 24'r' 2004
tl White. Dorninic 'shareholders dernand larger payout lrom Vodatone
''Vrtdulottr's t.lhn Iot inr est,'r'". ol'cit'
"shareholders denand larger payout from Vodafone profits"' op cit'

l:lr,i:l
 €.uropt Ast*fucric Arnenct
Se'uce ($< 6arner1, lbly Fre,+ce I **, Japen
i
Chura Ualed $de-s
t*a*hv I
\laddane -F+Fu+pErttitililnm)hliillW#i:t'::;ii:i. ffirfriffifrfitt,frtiiflr,ril
T-!*,bile ,!.a!tw..=:!E-17,

|!i?.t i
Tl{vi
Mrii,F;:{::,iii.*
o,wge

Ielejsrtps
:iifffi i#j!,;;E@
*rrrlOJ
?,,f,:,,F 4miuion

*tuire
.4.1?SIJ'E

tbine
@
...i..:+Lfij?4:ai!f,:E;:i

I inir,m ,,;;.j41-.:'i.
fl,Ir I

l},t-',arlit
,r\ffij
'u&liilF,
*,qplar ',,r..

AiZT
ld/isi*",.*-

Ss.'i'flPC.S
..
Smallskkeheld

Source: www.soundpartners.ltd.uk
 Vodafone-Mannesmann $183 billion
AOL-TimeWamer $l8l billion
MCIWorldCom-Sprint $ 127 billion
Pfizer-WamerLambert $88 billion
Exxon-Mobil $36billion
Source: "Vodafone seals Mannesmann deal", www.news.bbc.co.uk, February ll'h 2000

Share prices
January 1"t 1gg4=100

Vodafone

_. .-:-.-_ 600

=-*^** 400

, 'lxh"
,- ,,, n
lwgs s6 si eB-eg- "
,,__

Top five European Companies

By market capitalisation, October 30h 2000 €bn
0 50 100 150 200 25c 300 350

Source: "Newbury's finest", www.econornist.com, November 2d 2000

 ' Belgacom Mobile s.A. (Proximu s,25vo,w',.eress network operator, Bergium)

' cellco Partnership (verizon wireless,45zo, wireress network operator, us)

' China Mobile (Hong Kong) Limite d (3vo, wireress nerwork operaror, china)

' Europolitan vodafone AB (formerly Europolitan Holdings AB, wireless

network
operator, Sweden)
. Vodafone StoresAB (mobile equipmentretail sales, Sweden)
. Vodafone SverigeAB (wireless network operator, Sweden)

' Groupe SFR Cegerel (29vo, telecommunications services and hording

company, France)
' s.oci6t6 Frangaise du Radiotdldphone S.A. (sFR, 44Eo, wireless network
operator,
France)
. MobiFon S.A. (Connex GSM,2\Vo,wireless network operator, Romania)
' Polkomtel S.A. (Plus GSM,2lvo,wireless networkoperator, poland)
. Safaricom Limited (352o, wireless network operatol Kenya)

' swisscom MobileA.G. (25vo,wieress network operator, Switzerrand)

. Vodacom Group (fty) Limited (35Vo, holding company, Sourh Africa)
. VodafoneAG (formerly MannesmannAG, holding company, Germany)
. ArcorAG &CoKG (74Vo, fixed-lineoperator, Germany)
. Vodafone Albania Sh. A. (99 .7 Vu wireless network operator)
. VodafoneAmericas Inc. (holding company, US)

' vodafone D2 GmbH (formerly Mobilfunk GmbH, wireless network

operator, Germany)
' Vodafone Eg{Pt lecommunications SAE (formerly Misrfone Telecommunications
i
Company S AE, 67 Vo, wireless network opeiator)

' vodafon Espafla, s.A. (formertyAirter M6vil S.A., wireress network operator,
Spain)
. Vodafone Europe B.V. (holding company, The Netherlands)
. Vodafone Fiji Limited (4g%o,wireless network operator)

' vodafone Group Services Limited (grobar products and services provider)
. Vodafone Holding GmbH (formerly VodafoneAG, holding company,
Germany)
. ArcorAG &Co KG (74%o,flxed-l:rrre operator, Germany)
. Vodafone Holdings Europe S.A. (holding company, Spain)

' vodafone Holdings K.K. (formerly Japan Terecom Holdings co., Lt

d.,g6va diversified
telecommunications provider)

' Japan Telecom co. Lrd. (67Eo,fixed-line telecommunications carrier)

a^ < onld
 Voclafone K.K. (formerly J-PHONE Co., Ltd. (887o, wireless network operator holding
company, Japan)
Vodafone Hungary Mobile Telecommunications Limited, (formerly V.R.A.M'
Telecommunicafions Company Limited, 88olo, wireless network operator, Hungary)
Vodafone Information Systems GmbH (billing, IT, and B2B services, Germany)
Vodafone International Holdings B.V. (holding company, The Netherlands)
Vodafone Investments Luxembourg S.A.R-L. (holding company)
Vodafone lreland Limited (fonnerly Eircell, wireless networt operator)
Vodafone Libertel N.V. (wireless network operator, The Netherlands)
Vodafone Limited (wireless network operator, UK)
Vodafone Malta Limited (wireless network operator)
Vodafone Network Pty Limited (wireless network operator, Australia)
Vodafone New Zealand Limited (wireless network operator)
. Vodafone Omnitel N.V (formerly Omnitel Prontoltaliu7l7o, wireless network operator,
Italy)
. Vodafone-Panafon Hellenic Telecommunications Company (99.4a/c,
telecommunications and wireiess network operator, Greece)
. Unifon S.A. (mobile communications services provider, Greece)
. Vodafone Portugal-Comunicag6es Pessoais, S.A. (formerly Telecel ComunicaE6es
Pessoais, wireless network operator, Portugal)

Source: www.hoovers.com
 Germany
r-
l0pgg1g.1r*e !Ho- of
ry-''. *i*
subscdber* iHarhet sfnre i

i r+ioniu i rr,,3o$J,oo 4r?s

ii-*-:'^Vada{one i -'@

recs4onf, -i- i6,4-j i

; E-Ftus I d,?#0,00 0 i iJ96 i

-:---'*::--

Greece
*ff- .:,,: : :: ,; )

1ygf *"*--
ET3l:-iT!:[sj9,?Ii]ersl]rlarketqilarel
t-9q:f9r-l!11l1:- 1t!, fslp,rrrters na rket qtrar*
i*;r ;-w-1
i ] l
:-'.: i

:-* c-r,,,rrtu 4io*"*1

iP anaf*n Voda{oile: als4,0il, ', 32Yo i
l

i $tel#e,las I 68,:l}S ' oror

t,J-ta .
I
i
: Q-feJecom 366,50'] 4ffi ;

Totat : 1il,r89,300 t,]0H, :

Iceland

0peratu-llamr :Ho. of subscribers hlarketstnre,

JceJard la,eco,fi t lfi ,80il 689s r
I

[i00al0$effi-rJ.7ndrs.fi.] : ,
64,6ilf/ *_**, 3?gi
:'*i
Tatat j
:

:ot.+oo . ro,r*: j

Ireland

Operatr llanre ,lla of suhcribere

i
r..: -: ihlarlret shar
-,;-* lri
iu*'-tr,;,-€,r,*,,]
e(F.trcdil i {,s5e30(' i t$o/o i
jCI, i i-"n*-*-i
i,,i rrla,ro ; 4,!!,$ i
*l--ry1
j rtrfeteor i ttf,dr,rO j fg i
ry
] Iafa/ i a4sr.s00 I ?0r,,96 i

Contd.
 Italy
of submribers iiltarhet share
-t l

i 0peratr Hante |Ho- '_-....--.-*.'* ]

inrir*fleJec*m ite/ra] | le',SI0, flflrr i +r+s

_"-*:---*--*-l i

Ir:f*j I sr,rot,ar*

Malta

tlperatr t{ame rilo. iltll"-Etl

"tyryT_qlf i

J*L,r;;i;;* I: rn*,+r,*
t.
I' ,;rm i

so ,ttos,tr* i _]is,I-f __'* _jT- - _

i l'
l.:'

- -Iri;J'--i- :Srr3tru, - , t*,t9* t

:"""-,-*-'_,*--.--
," i

t'

IottI ,, l?i:0,]
,tl i?i.]f)ir
.Jr'i 10i.1'h
10i'r$ r
 Spain

i0p*rd; nr*. Iur-f -rb--,ibGit .rr-r rr"*

f-=.raeroncs
:-.**r' ; -.I:"'"'"
i I 1S,660,000 I SJ96
T r/odar,I',e f qrosroo
*[**t,o
i.f-*-T--*--
t{r??en,? I {6ff,0CI0 j
g,
'- --''- -
:fm
r--;;-l.-_=
j roral I 3r,02fl,600 i ?0s.H

Sweden

i
r%l+
operarr trrnr*
-ino,?ffiof*r,
m.r,,-t,t"r-

United Kingdom (UK)

--[*-
L-jflfli ,i r*,*ril,'?.lo r*

i ror;J I Il?,J#rr i tOnX

Source: "subscriber numbers by Operator, Western Europe as of

www.mobileisgood.com 4rh quarter, 2003,,
 -16 *"***-
Pretax Earnings
Fiscal Year 1*' -*.-*."*
MonthlY Close
Ending March, 31 It
"**-Mar,;00 July l,t ,02 :r
0ur:"l.l*Lu-u-l-t-t'tL-r*r-r.ur-Ll
I

A Dollars

Source:Capell'Kerry..Vodafone,sGentMayBeMakingtheWrongCall,,,www.businessweek.com,July