Crunch looms for Vodafone chief

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Vodafone’s results and its long-awaited future strategy statement, both due out Tuesday, will be make or break for Arun Sarin, the chief executive, say some big shareholders.

Mr Sarin is under pressure from investors to show how he can improve the mobile operator’s financial performance after warning last November of declining profit margins in 2006 and reduced revenue growth and lower free cash flow in 2007.

Vodafone’s strategy statement is expected to set out plans to improve revenue growth by getting more European customers to drop their fixed line phones in favour of mobiles. The company will also confirm plans to provide customers with high speed internet access over landlines.

Mr Sarin’s relations with investors have been further strained by allegations of boardroom infighting, but shareholders said they were focused on Vodafone’s results for the fourth quarter of its 2006 fiscal year.

“The figures are key,” said one top 10 Vodafone shareholder. “Arun Sarin won’t be able to blame his predecessors if anything is wrong with the numbers.” He will have been chief executive for three years in July.

Robert Talbut – chief investment officer at Royal London Asset Management, a smaller Vodafone shareholder – said: “Next week’s presentation is extremely important in terms of future relations between shareholders and the company. I think it is imperative that the company lays out a credible short term and medium term story.”

Vodafone is expected to say it will expand a service developed in Germany where customers can use their mobiles to make calls at rates similar to those on landlines when they are within a 2 kilometre radius of their homes. They only have to pay higher mobile rates outside the zone.

Vodafone Germany’s Zuhause service also offers special tariffs for wireless laptop users. They pay lower tariffs for internet access via Vodafone’s cellular network when they are inside the 2 kilometre radius.

People close to Vodafone said similar services to Zuhause would be rolled out across its European markets before the end of the year as part of efforts to increase customers’ mobile usage.

Vodafone is considering leasing broadband capacity from telecoms companies to provide customers in some European markets with high speed internet access over digital subscriber lines before the end of the year. It is not expected to buy fixed line networks.

Some smaller shareholders said Mr Sarin should be given more time to implement his strategy.

“Arun has still got one year to prove himself,” commented one smaller investor. “Those who want him to stay don’t feel as strongly as those who are canvassing for him to go.”

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