OUT of the storm, and into calm water, Arun Sarin has the look of a helmsman
who has seen dry land for the first time in years. “Come on,” he beams,
greeting me in the foyer of Vodafone’s Newbury head office, “I want to show
you something exciting.”
So it’s off to the Vodafone shop by the HQ’s ground-floor café. You can see
the assistant steel himself at our approach, but Sarin is all smiles and
warm acknowledgments. He wants to show me Vodafone’s new 3G plug-and-play
USB modem for lap-tops. It’s broadband wherever you want it, he exults. And
Vodafone’s got it first in Britain.
For Sarin, 52, Vodafone chief executive since 2003, it’s another sign that his
huge multinational is on the right track. Embroiled in extraordinary
in-fighting since 2005, when it seemed as if Vodafone’s old guard might push
him out, Sarin is now back on top with a spring in his step. A last attempt
to challenge his investment strategy in America was rejected by 93 per cent
of Vodafone shareholders in July. Things look easier ahead.
“I feel well supported by shareholders,” says Sarin with a strong smile, “and
very well supported by my board.”
Up in his glass-walled corner office, Sarin, neat as a shop-window mannequin,
is careful not to point fingers about the past. He is smoothly confident
about Vodafone’s new subsidiaries in Turkey and India – his birthplace – and
his fresh plans for South Africa, where the company is keen to buy out its
joint-venture partner. Vodafone is also showing new confidence in Britain,
where rivals say it is now feverishly chasing new users in a bid to regain
the No 1 spot from O2.
For Sarin, such success would be a fitting response to critics who still pore
over Vodafone’s problems and suggest he is looking for an exit. But why
would he want to leave now? The numbers are going his way, and he has the
people he wants around him. He has also just joined Gordon Brown’s advisory
board, the Business Council for Britain. It sounds like he is just getting
started.
And he is keen to trumpet Vodafone’s new shift in strategy, to expand beyond
mobile telephony into being a “total communications” group, offering a
variety of services and technologies that he calls “mobile-plus”.
“We are more than just a mobile company now,” he says. “We are getting into
mobile broadband, fixed-line broadband, mobile advertising – all of these
things, moving towards being a total communications company. We are also
much more regional now.
We believe in the power of regions, we want to be strong in Europe, where our
average market share is 30%, we want to make sure we defend and grow that .
. .”
He chats genially, his accented English reflecting a lifetime’s experience –
20 years growing up in India, 28 years doing business in America, four years
in Britain running one of our biggest companies. He looks relaxed, though
his nut-brown eyes and soft round features still give little away.
He is keen to stress that Vodafone will pick its battles carefully in future,
which will reassure investors. It doesn’t want to become a content producer,
but is interested in how telecoms and media converge. And the old ambition
to create a truly global mobile giant, driven by his predecessor Sir Chris
Gent, is now firmly shelved.
“It’s unlikely anyone will put together a truly global player,” he says. “If
anyone could aspire to it, it would be us” – with 230m customers out of the
world’s 2.5 billion users – “but the scale is so massive . . . Our view is
just to be strong in certain regions and concentrate on mobile-plus.”
So Europe will provide the cashflow to be invested in selected markets like
Turkey, India and Africa, or simply returned to shareholders as dividends or
buybacks. “We are building a company not just for today,” says Sarin, “but
one that will exist three years from now, and 10 years from now.”
Whether that will satisfy critics is another matter. Vodafone has long been
accused of an inconsistent approach, reflecting its rapid formation as a
bundle of acquisitions collected by Gent in the late 1990s. Sarin was
supposed to pull that together, with economies of scale giving it
cost-cutting opportunities. Yet Vodafone’s recent annual results showed it
being pegged back by rivals in Europe, although revenues elsewhere are
growing by 21%. In Britain – 6% of Vodafone’s revenues – it needs to raise
its game.
Sarin nods. “We have had inconsistent execution here; now we are executing
more consistently across pricing, distribution and products.”
That includes taking hard-nosed decisions about the new Apple iPhone. “It is a
2G phone, not 3G. When it’s a broadband phone we will be interested in
carrying it.”
Yet still no big push into fixed-line broadband here?
He shrugs. “The reason we are not doing it whole-hog here is because it is not
particularly profitable, but in Germany it is. We are looking at
opportunities in Italy and Spain too. There are no benefits to have the same
across Europe yet, but we keep looking at it.”
Those opportunities in Italy and Spain – negotiating to buy the Italian and
Spanish operations of the Swedish telecoms company Tele2 – will take
Vodafone further into fixed-line offerings. Hasn’t Sarin left it a bit late?
“No, with a brand like Vodafone you can come in when you want. Wait and see.”
How Vodafone grows its business has been an issue since Sarin took the top
slot in 2003. It lies behind the boardroom rows that threatened to end his
tenure, and behind the recent attempt by rebel shareholders to force
Vodafone to sell its 45% stake in American mobile operator Verizon Wireless.
That attempt failed, but the question remains. Why keep a stake in a
business that hasn’t paid you a dividend since 2005?
Sarin composes himself. “The important thing is for our company to have
exposure to the American economy and mobile business; without that we would
lose innovation and value-creation opportunities.”
And the value of the stake, close to $60 billion (£30 billion) goes up $10
billion a year. Yes, he needs to monetise that value for shareholders, but
it would be stupid to hurry. “At the right time we will find the right way,
but I don’t feel under pressure.”
Could Vodafone buy up the other 55 per cent? “That,” he smiles, “would be
hard, as it’s a very large slug of money.”
As for the internal rows that have dogged the company, and the leaks to the
press from different factions, he is sanguine. He admits the board became
“marginally dysfunctional” but says it is now united under new chairman Sir
John Bond. Did he feel threatened? He shakes his head.
“Just disappointed because when you are part of a public company board you
have to put the company before yourself. That’s the absolute cardinal rule;
you can’t have a personal agenda supersede the company. A couple of people
on the board were doing that and it was very unfortunate. And, no, I am not
going to tell you who.”
Yet it is well-documented that he lost the confidence of Gent, former chairman
Sir Ian MacLaurin, and some investors who took their concerns to the board.
The share price had collapsed, a massive write-off pushed the company into
loss, Vodafone had pulled out of Japan, senior executives were going. It
looked a mess.
Sarin sighs. “The key thing to say is that change is hard. The things people
were trying to protect were the legacy things. Do we have to be in Japan or
do we have to write off $40 billion on the balance sheet? Do we want to sell
the US as there’s lots of growth there? These are difficult decisions. If
you just go with the tide, things are easier, but you are not building for
the long term.”
Sarin’s determination has won him admirers. Sir Martin Sorrell, chief
executive at WPP, whose ad agencies work closely with Vodafone, says: “It’s
how we handle the tough things in life that defines us.” He suggests that
Sarin’s long experience of American business, where one individual often
holds the combined role of chief executive and chairman, may have left him
at a disadvantage in adapting to the British system.
Bond, who replaced MacLaurin as chairman last year, says the key now is to get
connected with investors and have a plausible investment proposition. “And
Arun understands where the industry is going better than anyone I have come
across.”
Many, however, wonder why Sarin has stuck it out. He is independently wealthy,
he has lovely homes in California and Hawaii, where he likes to surf. He
relocated his family here but he doesn’t need the hassle.
Last year’s return to Vodafone of former high flyer Vittorio Colao as deputy
chief executive prompted fresh rumours that he would soon be off.
But that underestimates Sarin’s need to prove a point. Born the second son in
an Indian army family that lost most of its wealth after partition in 1947,
he had already come a long way from Bangalore before finding success in
America. He is not going to quit Britain as a failure.
And as Bond points out, few know telecoms better. Sarin first looked at
mobiles as an MBA graduate at the Pacific Telesis phone company in San
Francisco in 1984. He later rose to become No 2 at its mobile offshoot,
AirTouch, and made millions when it was sold to Vodafone in 1999.
So coming back to run Vodafone was an opportunity to finish old AirTouch
business, and head a world-beating company in extraordinary times. “I felt,”
says Sarin, “that I had to help develop the firm into a genuinely
international company.”
Any regrets? “No,” he says gently, “no regrets.” Though he doesn’t think he
will run a big company again.
“I think my next phase will take me into seriously big investing.” Then he
laughs.
“Just having a little more control over a company . . . ” I get his point.
ARUN SARIN’S WORKING DAY
THE Vodafone chief executive wakes at 5.45am at his home in Surrey.
“I have a coffee and yoghurt for breakfast and am picked up at 6.45,” says
Arun Sarin. He then fields calls from colleagues during the hour-long drive
to Newbury. “It’s an open hour, anyone can call.”
Meetings at head office start at 8am. Sarin concentrates on strategy, resource
allocation, people and performance issues. He has eight senior executives
reporting to him. He also meets business partners, politicians, regulators
and shareholders. He works until 6.30pm, then fields more calls during the
drive home. He travels abroad for half of his time.
VITAL STATISTICS
Born:October 21, 1954
Marital status:married, with two children
School:King George’s Military School, Bangalore
Universities:Indian Institute of Technology, Kharagpur; University of
California, Berkeley
First job:management consultant
Salary package:£3.2m
Homes:St George’s Hill, Surrey; San Francisco; Hawaii
Car:silver Mercedes 600
Favourite book:The World is Flat, by Thomas Friedman
Favourite music:The Beatles, Tchaikovsky
Favourite film:Jurassic Park
Favourite gadget:Vodafone McLaren mobile phone by Sharp
Last holiday:Provence
DOWNTIME
ARUN SARIN relaxes by playing golf with other bosses like McLaren’s Ron
Dennis. “I play off a 15 handicap. We often play 5-5-10 – £5 for the first
nine, £5 for the second nine and £10 for the match.”
He also collects art by Californian impressionists. “They were American guys
who trained in Paris and then came back and painted landscapes in
California.” And Sarin likes to get involved with his wife in philanthropy.
“We endow a chair here and there,” he says.
When at his holiday home in Hawaii, he also enjoys surfing. He is probably the
only boss in the FTSE 100 who is a proficient stand-up surfer.
