Vodafone chief's departure is a sign of the times

A CEO stepping down after five years at a mobile operator might seem unremarkable. But Arun Sarin's imminent departure from Vodafone may well have a wider significance, argues Natasha Lomas.

Telecoms grandee Arun Sarin is to retire as Vodafone's CEO after five years in the job. But what does his departure from Big Red tell us?

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First, that being a mobile operator - even one as large as Vodafone - is not as easy as it once was. Western mobile markets are long in the tooth and growing a mobile business means seeking new customers in developing countries - a strategy that necessarily involves risk.

So Sarin's decision to invest big bucks in places such as Turkey and India was not always popular with shareholders - even if analysts now laud the $10.9bn bid for a controlling stake in Indian operator Hutchison Essar.

Reporting the company's latest financials in emerging markets this week, Sarin led with Vodafone Essar's "very strong" performance - saying revenue increased by more than 50 per cent during the year as it added customers at an average of 1.5 million per month since the acquisition.

Compare that with the two per cent organic revenue growth of Big Red in Europe and it's not hard to see why Sarin - and others in the mobile business - are banking on the developing world to keep their coffers filled. After all, if the competition in Europe doesn't kill you, the regulation just might.

So there's a sense Sarin is getting out while the going is good. Analyst Ovum has described Vodafone's performance as "solid but less than exciting" which, while perhaps not the greatest tribute to a CEO, is at least vaguely upbeat. And Sarin's position has looked shakier before now - the company share price, for instance, has been worse.

In fact the rumour mill has it that a deal was done a year ago when Vittorio Colao - the CEO-in-waiting - was brought back into the company, stating that he would take over as chief executive after a year. Which, if true, would suggest Sarin has been grooming his successor - and plotting the timing of his exit - with great care.

Giving what was presumably his final keynote at this year's Mobile World Congress (MWC) tradeshow in Barcelona in February, Sarin's words certainly had the air of a swan-song - laying out his hopes and dreams for the mobile industry, which included fewer mobile OSes, to simplify the development playing field; an end to competition between Long Term Evolution (LTE) and WiMax for the 4G future of mobile; and of course mobile broadband - something he's long held big hopes for.

But he also had fears too, warning operators they are facing the real possibility of becoming 'bitpipes' as innovative new players such as Apple arrive on the scene - a concern surely informed by the slowing growth he has presided over in Vodafone's mature markets.

He told MWC: "We must as an industry learn to both partner and compete with these new players because our customers want to experience entertainment such as music downloads, mobile TV, user-generated content such as YouTube and social networking sites such as Facebook and MySpace. We have to welcome these new ideas and yet make sure we are relevant for our customers."

There's no doubt the mobile industry is becoming more crowded and more complicated, even as turning a profit becomes more of a challenge - not least in the current economic downturn. So passing the reins to a well-groomed, well-prepared successor such as Colao - who has years of experience heading up Vodafone Italia - seems like the safe option for Vodafone.

But whether safe is enough for the turbulent times ahead remains to be seen.

Research out earlier this year by change management consultancy company Egrement suggests the CEO role itself is changing - a sort of CEO 2.0 is emerging - as average tenures shrink, chief executive churn increases and younger figureheads than ever before get promoted to the top job.

The consultancy puts the changing face of the CEO down to more pressures on chief executives than a decade ago - and the need for businesses to be more innovative to stay on top. And such pressures are acute indeed in the mobile world.

So even as we hail Colao as Big Red's new chief, expect someone else to rise to the top tomorrow - and perhaps a person more suited to the kind of risky business operators are going to have to engage in if they want to keep up with the moveable feast that is mobile.