Nick Read-s the market: Why Vodafone CEO won't bet on Indian telecom

Executives who have worked with him say he does not mince his words. In fact, unlike his mentor and predecessor, the legendary Vittoria Colao, he can be pretty blunt. Proof of this was at hand this week when Nicholas (Nick) Jonathan Read, who took charge of Vodafone plc last October, strongly criticised the Indian telecom regulator in front of a global audience at the Barcelona World Mobile Congress. He referred to regulatory outcomes that, over the past two years, have adversely impacted all telcos barring Reliance Jio. Given the power of the Reliance group, it is complaint that all incumbent telcos have made, but privately.  Read was also forthright about his view that the current pricing regime, a result of the uber-competition, was unsustainable because everyone was operating below costs.

 
The global CEO is all too familiar with the issues in the Indian telecom market, having been closely linked with Vodafone’s India business. He was chief executive officer of Africa, Middle East and Asia Pacific Region and on the board of its Indian subsidiary Vodafone Essar Limited. The British telecom major had entered the Indian market by contentiously buying out Hutchison Whampoa’s 67 per cent stake (Vodafone bought out Indian partner Essar in 2011). As the CFO at Vodafone plc, working closely with Colao, he had been involved in the telco’s attempt to take the company public with an IPO in India, which foundered on unfavourable market conditions. His critics say they missed the bus in their quest for high valuations. But the financial head of the company in 2016 faced an impairment of ^6.3 billion in its Indian business primarily to face the onslaught of Reliance Jio, which was offering 4G services virtually free, having been given a carte blanche by the regulator to do so (which was the burden of his Barcelona statement).

 
Read was also the key man entrusted with the task of merging Vodafone with Idea, which went through various ups and downs and regulatory challenges. It was Colao who floated the merger idea in 2010 when he met Kumar Mangalam Birla and the deal was eventually signed in March 2017.  Read even flew down to India last July to ensure that the merger took place on time, which it did in August.
 

The deal has had its financial impact on the world’s largest telco, however. And it was Read as the CEO who reported a loss for the first six months of FY19 for the UK company, one key reason being the £3.4 billion loss it had to face from the sale of the Indian operations. 

 
Little is known about Read, who mostly worked in Colao’s shadow as his boss transformed the London-headquartered company from an owner of a host of networks across the globe, some with minority equity, to an integrated telecom company dominating Europe. Colao’s abrupt announcement that he would step down in May last year after a 10-year stint brought his CFO into the limelight. 
 
An alumni of Manchester Metropolitan University with a degree in finance and accounting Read rose from the ranks to become the CFO in Federal Express Worldwide for Europe, West Asia and Africa region, joining Vodafone plc in 2001. But it was Arun Sarin, Colao’s predecessor as global CEO, who brought the finance man to become chief executive of its UK operations in 2006. Read also honed his skills as the regional CEO, overseeing the groups telecom business in Africa, middle east and Asia Pacific and as director in the Indian subsidiary and Indus Towers (and joint venture with Airtel and Idea), and experienced the challenges of operating in the highly competitive Indian market at close quarters.

 
Former executives who have worked with him say that unlike Colao, who came from consultancy background, “Nick” has both operational experience in running telecom networks as well as a sharp financial brain, a combination that is key for the company currently. But he also has to step into big shoes: Colao, apart from transforming Vodafone, was instrumental in some huge deals –the sale of a 45 per cent stake in Verizon Wireless, for instance, for $130 billion. 
 
So what is Read’s strategy for the Indian business after the merger? That is best reflected in what he has said in various interviews last year to analysts. One, Read points out that the India business is ring-fenced because the UK company will not put in more group capital. Two he acknowledges that the merged telecom service business is highly leveraged, but hopes that synergies from the merger and even a 10 per cent increase in average revenue per user would make a significant difference. And third, Vodafone is sitting on liquidity through its stake in Indus Towers which can be used to fund any capital needed.

 
That might explain why Vodafone is reportedly planning to raise $1.5 billion of fresh equity in Vodafone-Idea Ltd by pledging its shares in the tower business. Clearly, Read is not willing to splurge more money in telecom in India anymore.