Vodafone exits China. The start of something big?

Sir John Bond was appointed as Chairman of Vodafone back in 2006 in an effort to defuse a boardroom schism that, had it been allowed to fester, could well have done serious, or even terminal, harm to the company.

However, although he did manage to stabilise matters and later defuse the rancour, Vodafone's shareholders (as well as many industry analysts) regard his tenure as an opportunity missed.

Last month, at the AGM, one of Vodafone's most influential institutional shareholders, the Ontario Teachers Pension Plan, demanded that the chairman be removed from post. In the event, 6.5 per cent of shareholders voted against the renewal of Sir John's contract; a minority, but a sizable and important one. it is now evident that the criticism by these shareholders hit home and change is in the offing. The Ontario Teachers Pension Plan called Vodafone's acquisitions policy "disastrous" and "riddled with strategic inconsistencies and weakness".

The fact of the matter is that if Vodafone actually has any sort of coherent acquisition policy it is damned hard to determine what it is. The company seems to have gone at things in an unplanned, reactive and opportunistic way that has left it with a diverse, patchy and partial set of assets that seem to bear no strategic relationship to one another or the parent company.

Now, at last and after much stockholder agitation about Vodafone's perpetually under-performng share-price, action is at hand. Vodafone is to begin to divest itself of various busineses and divisions, starting with its holding in China Mobile, a quick sale that, in short order, could soon raise £4 billion plus.

Vitorio Calao, Vodafone's current Chief Executive, is due, at long last, to unveil the company's revised strategic plan within the next month or so (plans that have been in development for longer than the gestation period of an elephant) and is keen to see the China Mobile holding sold-off as soon as possible either to a single buyer or to several.

Mr.

Colao has certainly taken his own sweet time over making changes but now seems set to sweep away the confused global legacy of his predecessor, Arun Sarin, and to give Vodafone a much more defined focus. He certainly needs to do something. The company share price remains in the doldrums and shareholders, who  haven't had a dividend since 2005, are getting understandably anxious and angry.

In recent years, and as a result of acquisitions made for silly money at the height of a then-fevered market, Vodafone has been forced to write-down and write-off massive amounts of value on various companies in which it has taken an interest, the most recent being India, where Vodafone has lost a packet.

It seems that Mr. Colao will now concentrate Vodafone's growth strategy on Europe, Africa and India (despite past losses in the sub-continent) and will give up on ambitions for the company to be a huge global player.

If he's going to do that, the chief exec is, sooner or later, going to have to deal with the thorny issue that is Verizon Wireless. Vodafone owns 45 per cent of the US mobile carrier but has never made a red cent from the investment because Verizon has, since 2005, been refusing to pay a dividend. The asset value of the Verizon holding is massive, but can only be realised if Vodafone sells it - something the company has long been loath to do.

So far, Vittorio Calao has been reluctant to grasp this particular nettle despite having acknowledged back in November last year that the Verizon Wireless issue is "my top priority"  and "Vodafone's biggest problem".

Many speculate that the inaction has been forced on Mr. Colao by Sir John Bond and his deputy and now that the chairman is on his way and thus effectively without much residual power, the CEO may, at last, be able to do something about the Verizon Wireless problem.

In the meantime, Vodafone shareholders will have something to smile about for once. The company says that 70 per cent of the net proceeds of the China Mobile sale will be channeled to shareholders via a share buyback scheme, while the remaining 30 some odd per cent will be used to "reduce the Group’s net debt."