Business Week: November 2, 1998
Cover Story
From Business Week Magazine
CELL-PHONE SENSATION
Vodafone's scrappy attitude makes it a wireless leader
When Chris Gent took over the top job at Vodafone Group PLC a year and a half ago, Britain's No. 1 cellular-phone company was on a roll. It was gaining share in Britain's fast-growing market and pushing into new ventures abroad. Gent, not one to shy from tinkering with success, overhauled the company's marketing. He fired the ad agency, launched a promotional campaign, and revamped distribution, putting 250 Vodafone stores on ''High Streets''--the British term for main thoroughfares--throughout the country.
The result? Vodafone is on a growth and earnings tear. The $4.1 billion company, which earned $702.2 million last year, is on track to top that by 30% in 1998, according to analysts. And its stock, withstanding the tremors in world markets, has maintained its 50% gain so far this year. These numbers have made Vodafone the surprise top performer among non-U.S. companies in the BUSINESS WEEK Info Tech 100.
''LIKE ROCKETS.'' Raging cellular-phone growth worldwide is certainly a key to Vodafone's heady numbers. In Britain, where the company gets 60% of its revenues, the wireless market is growing by 30% a year. Outside its homeland, the company runs six cellular operations, from the Netherlands to South Africa, holds minority stakes in six others, and plans to offer service in Egypt in December. The international operations aren't terribly lucrative--they generate only 20% of the company's profits. But Gent sees long-term value abroad: ''Some of these countries are going like rockets,'' says Gent.
And don't count out a British cell-phone invasion of the U.S. With its global success and a market cap topping $35 billion, industry executives think Vodafone may try to gain a foothold in the world's largest cellular market. Gent doesn't dispel the notion. ''We could acquire someone with a U.S. business,'' he says. AirTouch Communications is one of the possible targets, say analysts.
If Gent ever makes that move, Americans will get a taste of the aggressive salesmanship that has put Vodafone on top in Britain. Although the company boasts a 35% British market share, Gent fights like a scrappy underdog. The CEO, who was trained as a marketer, tends to lead rivals such as British Telecommunication PLC's Cellnet in price cuts--he has dropped rates some 20% this year. That has helped him add 778,000 customers this year, or 34% of the total.
Gent will need to keep innovating to meet the challenges ahead. Tiny telecom startups across Europe, including more than 100 in Germany alone, are proliferating. And in as little as two years, the cellular industry will begin a major technological shift to so-called Third Generation wireless systems that will offer high-speed data transmission. Says Kenn D. Walters, managing director of Globus, a consultancy in Munich: ''Right now it's Vodafone's turn to crow, but they have to keep looking over their shoulder.''
Gent vows to do just that. To keep his place at the head of the pack, he's ready to tinker with Vodafone again.
By Stephen Baker, with Inka Resch, in Paris
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