Martin Vander Weyer Martin Vander Weyer

What Vodafone should do with its huge windfall: invest it in the next Vodafone

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Vodafone, which has just collected an £84 billion windfall from the sale of its 45 per cent stake in Verizon Wireless of the US, is either a hero or an anti-hero of British capitalism, according to taste. To me, the world’s second-largest mobile phone business is heroic because it achieved that position from a standing start just 30 years ago, when poker-playing Ernie Harrison, chief executive of a military radio manufacturer called Racal, bet everything he had on the future of mobile telephony. At a time when other electronics companies thought it too uncertain a prospect to bother trying to compete against the monopolistic British Telecom, Harrison and his colleague Gerry Whent started Vodafone (originally Racal Telecom) in a small office in Newbury, and grabbed half the UK market. It was the most important British start-up of the 1980s, the only one to compare with the new giants of the US technology scene.

To other observers, however, Vodafone exemplifies much that is bad about modern corporate behaviour. Former HMRC inspector Richard Brooks, in The Great Tax Robbery, fingers the company as an arch-exponent of the use of European tax havens to avoid billions of pounds of UK taxes, illustrating his point with a photograph of an unmarked door to ‘the locked office that is home to Vodafone’s Luxembourg companies’ Swiss finance branches’.

Vodafone has also never quite lived down the terrible precedent set by its board in awarding a £10 million ‘transaction bonus’ to then chief executive Sir Chris Gent merely for completing the £112 billion takeover of Mannesmann of Germany in 2000, without waiting to see whether it generated good value for shareholders. The deal took the group to the top of the FTSE 100 but also drove it into temporary losses, and the market’s conclusion was that Mannesmann had been grossly overpriced.

No such hindsight seems likely to apply to the cash sale of the Verizon stake, which will generate £54 billion of dividends, of which £22 billion is for UK investors.

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