Vodafone returns to profit; CEO Sarin to step down
Vodafone Group PLC, the world's biggest mobile phone company by sales, announced the surprise resignation of chief executive Arun Sarin on Tuesday as it posted a return to full-year profitability.
Sarin, who led Vodafone's expansion into emerging markets like India, Turkey and the Czech Republic over his five years in the top job, will be replaced by his deputy, Vittorio Colao.
Sarin, 53, faced disquiet two years ago when nearly 10 percent of Vodafone shareholders voted against his re-election as chief executive. Investors were unhappy about an acquisition-heavy expansion and calls for a spin off its stake in U.S. subsidiary Verizon Wireless.
But Vodafone has since outperformed expectations and revenue growth in emerging markets has jumped. Its global customer base has more than doubled from 120 million to 260 million under the Indian-born Sarin's tenure and the company's share price has risen by about one-third over the same period.
While the timing of the Sarin announcement surprised some, the nomination of Italian-born Colao, 46, as his successor was largely expected.
Shares in the company rose 1 percent to 164.95 pence ($3.25), bolstered by both the smooth succession plan and the strong full-year results.
Vodafone posted a net profit for the year to March 31 of 6.76 billion pounds ($13.25 billion), compared with a net loss of 5.29 billion pounds a year earlier when impairment charges on its Italian and German operations hurt earnings.
Profits were also driven by cost reduction and outsourcing programs in Western Europe.
Revenues increased 14 percent to 35.5 billion pounds ($70.2 billion), from 31.1 billion pounds the year before.
"With full year results and outlook better than anticipated, helped by an FX tailwind, and a new CEO to take the company forward, we would expect earnings upgrades to continue and expect today's announcements to be well received," said Collins Stewart analyst Mark James. "FX" refers to favorable foreign-exchange rates.
Sarin, 53, said he "felt the timing was right to hand over as the company is in a good position strategically."
"I've achieved what I set out to achieve when I took the position," he added in a conference call.
Sarin has been credited with expanding Vodafone's operations in fast-growing emerging markets, such as Eastern Europe and India, through a series of large acquisitions, culminating in last year's 5.7 billion pound purchase of a controlling stake in Hutchison Essar, one of India's biggest mobile-phone groups.
After the shareholder criticism two years ago, the company sold its underperforming Japanese unit for 8.9 billion pounds, which resulted in a 6 billion pound return to investors.
In 2004, the company lost out to Cingular Wireless during the fierce bidding war for AT&T Wireless, then the U.S. third-largest mobile operator, as it tried to expand its presence in the fast-growing U.S. market.
Colao now faces the same challenges as his predecessor, taking the helm of the company at a time when business growth is being challenged by the economic downturn and by rising inflation and food prices in the developing world, where it is targeting expansion.
Sarin said the company would "navigate through" those difficulties. He added that it was interested in possible acquisitions in Africa and Asia, but declined to say any more about potential deals.