Vodafone loses its way

When Vittorio Colao stepped down as chief executive of Vodafone earlier this year, he was treated like an allconquering hero.

But investors keeping an eye on the vanishing Vodafone share price and shrinking stock market value might be asking different questions of his successor nick Read.

In recent days, the shares have hovered at 145p, down from a year-high of 239p, putting a value on the telecoms group of £39.1bn, and it has now slumped to just 15th in the FTSe 100.

It is hard to remember that Vodafone was Britain’s flagship tech group and a pioneer in the fast-growing telecoms and data markets in the Japan and the United States. Both stakes have been discarded.

The shareholding in Verizon Wireless was sold for a phenomenal £100bn. In effect, the empire built by the excellent Sir Chris Gent was dismembered, leaving behind a group which is a shadow of its former self.

A strategy of expanding into emerging markets, such as India, has proved disappointing because of intense competition.

It is hard to think that digging deeper into low-growth europe, by acquiring Liberty Global’s networks, can ever pay off. Getting a good deal from America’s ‘cable cowboy’ John Malone was never going to happen.

Colao and his predecessor Arun Sarin were under constant pressure from shareholders to de-clutter and release value from the Verizon Wireless stakes.

But assets were relinquished in advanced Western economies just at the moment that the smartphone and data revolution took off.

In 2006, Vodafone sold its Japanese offshoot to tech investor Softbank for £8.9bn. A decade on and Softbank is on the verge of sponsoring Japan’s biggest ever initial public offering in a deal for the former Vodafone unit expected to raise up to £20bn.

Being a minority holder in Verizon Wireless was never a comfortable place to be. Sarin did well to avoid a quick sale and create the value which Colao cashed in. But it was a latecomer to data.

The value which might have been created by hanging on or maintaining a smaller stake in Verizon was sacrificed for immediate cash.

Shareholders ( including this writer) received a cash bonus. But there are serious questions to be asked as to how a highgrowth entity allowed itself to become a sub-performing utility.

Staley resistance

The Vodafone experience suggests that Jes Staley is right to resist the attentions of corporate vampire edward Bramson’s assault on Barclays’ investment banking.

It is easy to show that the returns on its credit cards is far superior to that from M&A. But it is a meaningless comparison.

Barclays, as the only fully functioning investment bank in europe, has an enormous opportunity if it can keep out of trouble and avoid the excesses of the John Varley and Bob Diamond era.

Lingering costs of the past are still there, the latest being a £1.4bn fine from the US Department of Justice for the mis-selling of mortgage securities. It seems only yesterday that a very senior Barclays executive was explaining to me that its portfolio of sub-prime mortgages were a higher grade than those of other banks.

Barclays deserves credit for defending the performance of the investment bank rather than giving in to bullies.

A much better performance in equity trading drove the investment bank performance in the third quarter when Barclays was the third-biggest player in global debt markets and involved in major M&A such as the high-profile Michael Kors acquisition of Versace.

As the UK heads towards Brexit the importance of Britain maintaining a strong presence in American- dominated investment banking is enormously important.

Bramson is better at taking on the weak.

Hidden treasure

ShOULD there be any doubt about the importance of Barclays and financial services to the UK economy, it is worth looking at new data today from the industry’s advocacy group CityUK.

It shows the UK to be the world’s leading exporter of financial services in 2017 with a surplus of £68bn – that’s equal to the next three contenders combined.

Small wonder that French president emmanuel Macron wants a share of the after-Brexit business.

Best of luck with that.