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Vodafone’s Surfer CEO Colao Dismantles Global Empire

Vodafone Group Plc (VOD) Chief Executive Officer Vittorio Colao has cemented his legacy as the man who shrank the world’s biggest mobile-phone company and cleansed it of past excesses.

In November 2009, just over a year after taking the helm, the former McKinsey & Co. partner said that his mission was to “solve” Verizon Wireless. While the venture with Verizon Communications Inc. (VZ) -- now the biggest U.S. mobile-phone company -- was a source of billions in profits, it was out of his control because Vodafone held just 45 percent. This week, he did it, getting $130 billion in the biggest deal in a decade.

“It’s a great asset; it’s an asset with a fantastic team managing it,” Colao said in an interview with Bloomberg TV. “We got the value that a good asset deserves.”

The stake’s sale fits with the 51-year-old surfer’s mantra, according to a person close to him, who asked not to be identified recounting private conversations: “Ride the wave, don’t try to dominate it. Otherwise, it’ll kill you.”

It took Colao five years in office to clinch the Verizon Wireless deal, a wait that paid off as Vodafone held out for $130 billion, $30 billion more than the New York-based company was said to have proposed at the start of this year by people familiar with Verizon’s plans.

Photographer: Jason Alden/Bloomberg

Vodafone Group Plc Chief Executive Officer Vittorio Colao. Close

Vodafone Group Plc Chief Executive Officer Vittorio Colao.

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Photographer: Jason Alden/Bloomberg

Vodafone Group Plc Chief Executive Officer Vittorio Colao.

Scaling Back

“Colao has deep strategic perspective, and he’s also very energetic when it’s time to execute, make decisions and push for deals to get done,” Francisco Roman, chairman of Vodafone’s Spanish unit, said hours before the deal was announced.

In his five years as CEO, Colao has unwound the globe-spanning empire his predecessors built, emphasizing profitability over maintaining Vodafone’s size. As he cut holdings in France, Japan, Poland and China and focused on getting out of what Vodafone didn’t control, China Mobile Ltd. usurped it by revenue in 2010. Today Vodafone trails the Chinese carrier by revenue and subscribers.

Under the Italian native’s tenure, Vodafone stock has risen 40 percent, adding about 20 billion pounds to the Newbury, England-based company’s market value. The shares have gained more than 20 percent since March 5, when Bloomberg News reported that the two companies were seeking to resolve the partnership this year.

Today, the stock added 2.2 percent to close at 207 pence in London.

SFR Coup

Colao’s reputation as a shrewd dealmaker stems in part from his disposal of Vodafone’s 44 percent stake in French mobile-phone company SFR to majority owner Vivendi SA. (VIV) He said jokingly to Bloomberg News in October 2010 that he planned to send the then-Vivendi CEO Jean-Bernard Levy a fountain pen for Christmas to sign the check. Eight months later, he walked away with more than $10 billion.

The 2011 sale came at the top of the market, just before a price-war that gutted wireless rates in France. Levy estimated that full control of the stake would add 600 million euros to adjusted profit in 2012 and 2013.

A year later he told investors he’d lost 208,000 subscribers in the first two months of 2012 and earnings before interest, taxes, depreciation and amortization would drop as much as 15 percent in 2012. Levy stepped down as CEO in June that year after failing to revive the company’s stock from a nine-year low and amid strategy differences with the board.

Policeman’s Son

Colao “struck the deal to sell SFR and what happened a year later was the company started to collapse,” said Robin Bienenstock, an analyst at Sanford C. Bernstein in London. Miscalculations were the major reasons why the board asked Levy to go, a person familiar with the company’s decision said, asking not to be named discussing confidential talks.

Colao grew up in Brescia in northern Italy. His father, a member of Italy’s Carabinieri military police, died when he was a teenager. He was close to his mother and would spend weekends near her in Desenzano del Garda, in Lombardy, according to the person close to him.

Colao attended Milan’s Bocconi University and Harvard Business School. After a stint at McKinsey’s Milan office, he got into telecommunications in 1996, joining Omnitel Pronto. Three years later, it became Vodafone Italy and he was named CEO of the unit. Another three years passed and he was promoted to lead Vodafone’s operations in southern Europe. In 2003, he joined the board and added Middle East and Africa operations to his remit.

Media Sojourn

In 2004, Colao left Vodafone for RCS MediaGroup SpA (RCS), an Italian media group that runs a daily newspaper and magazine, book publisher, radio and television broadcasters and websites. Colao described it as a call of duty from his home country, the person close to him said.

Colao approached RCS like a consultant. Profits more than doubled in the first year and he adopted a strategy for international expansion. Meanwhile his shareholders wanted a CEO who’d use the media assets for political pronouncements, said the person. He resigned in 2006 and returned to Vodafone.

The surfing fan -- he posted a photo on Facebook in his wetsuit with his board -- is a keen cyclist as well. He attends the “Maratona delle Dolomiti,” an annual bike race through the Dolomites mountains, and whenever he has spare time at home in London, he jumps on his bicycle, the person said.

Bike Race

Colao even participated in a 50 kilometer (31 miles) bike ride with Verizon CEO Lowell McAdam. Their relationship -- they worked together when McAdam was with Vodafone AirTouch in the 1990s -- helped pave the way for the Verizon Wireless sale. AirTouch was one of the four companies that formed what would become Verizon Wireless in 1999.

Colao cited McAdam in particular on a Sept. 2 conference call following the sale’s announcement, saying he’s one of the people “who should feel very proud” of the deal’s success. “I feel grateful that these people trusted me,” he added.

“We have had very positive, very consistent conversations for years with Lowell and Verizon about this asset, and at some point, the right value materialized,” Colao said in an interview with Bloomberg TV. “When the right value is there, you have the transaction.”

It was a warmer relationship than Colao’s predecessor, Arun Sarin, had with McAdam’s, according to a person familiar with their exchanges, who asked not to be identified because they were private. Ivan Seidenberg was a New Yorker who worked his way up from cable splicer to CEO of the second-largest phone company in the U.S. over a 45-year career there.

M&A Wave

Riding a wave of consolidation in the U.S. this year -- SoftBank Corp. took control of Sprint Nextel Corp. and Deutsche Telekom AG’s merged its T-Mobile USA unit with MetroPCS Communications Inc. -- the Verizon Wireless sale also caps Colao’s efforts to trim back Vodafone, leaving it with assets in Europe, Africa and India and about $10 billion in cash to fortify them. The company has earmarked the other $20 billion left over for cutting debt.

Vodafone will offer more “unified services” packages that combine Internet, phone and TV services for businesses and consumers that can increase revenue and customer loyalty, he said.

In its biggest bet on fixed-line services, Vodafone in June agreed to buy Kabel Deutschland Holding AG, Germany’s largest cable-television company. Last year, it acquired U.K. fixed-line operator Cable & Wireless Worldwide Plc. Vodafone has also eyed Italy’s Fastweb SpA, people familiar with the matter told Bloomberg News in June.

Next Deal?

Alternatively, Colao could orchestrate a second mega-deal. During the negotiations over the Verizon Wireless stake, merging the parents was an option under consideration. Colao could sell post-Verizon Vodafone to AT&T Inc., which is looking for mobile assets in Europe, analyst Bienenstock said, setting the price tag at about 80 billion pounds.

“He’s still a young man,” Bienenstock said. “I don’t think he’s going to ride off into the sunset just yet.”

Colao says as much himself.

“As long as the board and my shareholders support me and have trust in me, I am super committed to the next chapter of Vodafone: Chapter 3,” he said during a conference call this week to announce the deal of the decade.

To contact the reporters on this story: Amy Thomson in London at athomson6@bloomberg.net; Daniele Lepido in Milan at dlepido1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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