Will Morrow's departure unwind Vodafone's turnaround?

The departure of Bill Morrow from Vodafone might be a win for NBN Co, but it is a loss for Vodafone.

Bill was specifically recruited as CEO of Vodafone Australia to fix the dramatic decline of the company after its significant networks failures two years ago. The fact that Vodafone's subscriber numbers continue to decline indicates that these problems are yet to be fully remedied and the telco has a long way to go before it reclaims its former glory.

The problems Vodafone is facing sit on top of the already difficult position the company is in after two questionable strategic directions.

The first came right at the beginning, back in the 1990s, when it decided not to start reselling services on the then analogue mobile network from Telstra. This put Vodafone in a rather distant third position in the market, which, at the start of the network problems, stood roughly at a 50 per cent market share for Telstra and roughly a 30 per cent market share for Optus.

The subsequent merger with Hutchison also added a significant debt to the organisation. And it left them with a mixture of network technologies which might have been one of the chief causes of the consequent network problems.

Bill Morrow has made inroads, but the problems are far from resolved and in that respect his departure will be disruptive for a company that cannot afford any more disruption. Obviously, an ambitious person like Bill loves the NBN challenge, which suddenly places him in the international limelight. Perhaps the contracts were not tight enough to ensure that he would not leave before his job at Vodafone was finished. If that was the case there was not much the company could do to stop him from moving to NBN Co.

The search will now be on for his replacement at Vodafone – not an easy task. People that take on such projects have to be very strong-willed and to a certain extent single-minded about the job that needs to be done. Often that means a change in strategy, new brooms, new adjutants etc. This could potentially undermine the work done so far by Morrow. A softer person might well keep the changes as they are but might not have that same drive to get the job completed.

So, no easy road ahead for Vodafone. More significant changes for the company have been rumoured before, for example, a potential sale of Vodafone Australia. The official line of the company has always been that Vodafone Australia plays an important role in the overall international organisation and that therefore no changes are planned, but looking after the needs of customers from an international perspective can also be achieved through partnerships arrangement, minor shareholdings, etc.

In a rapidly consolidating telecoms market, where the need for an integrated mobile and fixed infrastructure becomes increasingly evident, Vodafone could be an attractive takeover target for the likes of TPG, a company that is progressively staking out its position as one of the country’s leading telecoms infrastructure companies.

From a national competition perspective it's vital that Vodafone remains as strong as possible in whatever format; a further shrinking Vodafone is certainly not in the interest of competition.

This is an edited version of a post originally published on Decembe 17. Paul Budde is the managing director of BuddeComm, an independent telecommunications research and consultancy company, which includes 45 national and international researchers in 15 countries.