THE proposed sale of Vodafone’s Japanese business was hailed last night as a landmark move that marked the unravelling of the world’s biggest mobile player.

A successful sale of the business, the biggest contributor to Vodafone’s revenues, would be first big disposal in the group’s history. It could pave the way for further sales — such as that of Verizon, its US business, analysts said.

More significantly, it seems to mark the beginning of the end for the empire-building strategy famously followed by Sir Christopher Gent, Vodafone’s former chief executive. As Vodafone’s performance has suffered and its share price has floundered, this is a strategy whose logic has been called into question by investors and analysts alike.

Last night Hilary Cook, of Barclays Stockbrokers, said: “What the market wants is for the company to run itself with a steady revenues stream. There’s no need for Vodafone to chase global dominance.”

Under Sir Christopher, Vodafone went on a global buying spree that propelled it from a small, Berkshire-based, operator to the world’s biggest mobile operator by revenues.

A lightening series of deals, launched with the £43 billion takeover of America’s AirTouch and taking in the £101 billion acquisition of Mannesmann in 2000 — one of the biggest ever takeovers — has left Vodafone today with holdings in 27 countries.

The logic of these tie-ups was simple: to create a global machine that, through size and efficiency gains, could better compete against rivals and provide better deals to consumers.

However, as the buy-ups continued under Sir Christopher’s successor, Arun Sarin — with Vodafone last year spending billions of pounds boosting its positions in countries including South Africa and India — investors and analysts started to question this logic.

Since Mr Sarin joined Vodafone in late 2002, its share price has weakened. Recently it hit a three-year low in intraday trading after warnings about slowing growth, news of a potential £5 billion tax liability and a huge goodwill writedown.

As the seemingly unstoppable Vodafone machine conceded that it was feeling the heat, investors asked whether it made sense for the group to hold interests in certain countries or whether it could realise more value for shareholders by pulling out of some areas and handing the cash back to shareholders.

Top of the sell-off wishlist was Japan, after the group’s persistent underperformance, and the United States, where it has only a minority holding in Verizon Wireless.

Although shares in Vodafone surged yesterday, some shareholders stayed cautious. A sale, they said, would not solve Vodafone’s bigger problem of the increasing pressure it faces in its core European markets.

Some also said that, far from easing pressure on Mr Sarin, the Japan U-turn — after Vodafone’s long insistence that it would not quit Japan — was evidence of a need for new, clear-headed management.

GROWTH OF GLOBAL GROUP

Feb 2006: Shock writedown of £28bn amid a warning about slowing sales. Criticism of Sarin mounts

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