Mixed signals from Vodacom
Vodacom doesn't seem to be quite as confident as it should be for a company that leads SA's mobile industry. Is something amiss at SA's biggest cellphone operator? By Duncan McLeod.
The resignation last week of Vodacom Group CEO Pieter Uys raises interesting questions about the future of SA’s most powerful mobile phone operator under the UK’s Vodafone, especially as it faces an increasingly fractious and competitive industry.
When I first heard in May that Uys, 49, was leaving Vodacom to make way for the group’s former SA MD, Shameel Joosub, Uys joked with me that my source was probably the comedian Pieter-Dirk Uys. He made it clear to me at the time that he wasn’t going anywhere.
Two months later and the group announced he would step down early in 2013 after a seven-month handover period. It’s not clear whether he is leaving of his own accord or whether Vodafone gave him the gentlest of nudges. But I do find it a little strange that he’s leaving now, when the company is doing so well.
Perhaps it’s just a smart call by Uys, who has been CEO for four years, to leave when the going’s still good.
There’s little doubt that the man has done a great job at Vodacom. He’s made some mistakes, to be sure, including overpaying grossly for pan-African telecommunications player Gateway Communications, but he also oversaw Vodacom’s successful listing on the JSE and ensured a stellar return on investment for shareholders, in terms of both share price performance and dividend payments.
He’s done well, but the question has to be: is Uys leaving at the top?
Though there’s no doubt Vodacom is well run, I hear whisperings that this isn’t quite the confident company at the top of its game that it should be.
There have been a few clues to this effect, not least Vodacom’s poor attempts at reacting to the recent moves by its old boss Alan Knott-Craig, who is now leading Cell C, to cut rates and simplify tariff plans.
With its commanding market share in SA of around 50% of all subscribers, Vodacom has the luxury of watching its smaller rival before rushing into anything it shouldn’t. Yet its hurried product announcements in recent months appear to be rather reactive. The impression is that Vodacom is running a little scared of its former CEO.
Certainly, Vodacom needs to worry about what Knott-Craig is doing. After all, he knows his old employer backwards. And his knowledge of and contacts in the industry, especially in the crucial sales channel, mean he’s able to stir up things more than any previous Cell C CEO. Even so, Vodacom, through its recent actions, has shown itself to be a little on the back foot. And its newly announced smartphone tariff plans, clearly a reaction to Cell C’s new contract offerings, are unnecessarily complicated.
Of course, this may also be a product of being a subsidiary of a global telecoms company. It appears Vodacom, like Absa under Barclays, is now little more than a small arm of a giant multinational, forced to comply with global dictates. Its managers on the ground may now have little space to innovate for local conditions. This makes the job tough for Joosub, Vodacom’s CEO-designate. It’s far from clear that Vodafone will give him the latitude he needs to compete effectively in a rapidly changing local environment.
In the next few years, highly profitable voice services are going to give way to lower-margin data as the primary source of income for mobile operators. The temptation for Vodacom, under Vodafone, will be not to change too much in the hope the (voice) goose will continue to lay the golden eggs.
Vodacom’s new smartphone tariff plans announced this week are hopelessly complicated and reflect an old-school way of thinking. Without a change in approach, including offering simplified and transparent tariff plans, Vodacom may be courting trouble for itself in the years to come. — (c) 2012 NewsCentral Media