The news out of Vodafone today is that Darryl E. Green, CEO of both Vodafone KK and Vodafone Holdings KK, has resigned for personal reasons. An interim CEO has been appointed while the companies search for a permanent replacement. Green’s departure is not unrelated, we suspect, to Vodafone’s recent grim Japanese financial results. While it’s too early for a full postmortem, it might help bring perspective to the situation to point out a number of successes that Vodafone achieved on Green’s watch.

We guess media reaction to the news of CEO Green’s departure will be mostly negative.

His move comes on the heels of last month’s announcement of large financial losses at Vodafone, to the tune of 100 billion yen in the fiscal year ending 31 March 2004.

This compares (rather unfavourably) to a profit of 79.5 billion yen in 2003 (when the company was still J-Phone). In other words, Green inherited a veritable money-making machine with a reputation for bold mobile Internet innovation (camera phones, picture mail, movie mail, etc.) and he leaves behind a sinking money pit lagging badly in the vitally important 3G race.

While it’s too early for a full postmortem on Green’s departure, it might help bring perspective to the situation to point out a number of successes that Vodafone achieved on Green’s watch.

First, the financial results were not as awful as they could have been. Green had expected a loss of 114 billion yen, 14 billion more than what was reported. Furthermore, most of this was due operating, ordinary, and net income deficiencies due to increases in 3G depreciation costs, handset inventory provision, and retention initiatives.

In fact, Vodafone experienced overall revenue growth of 3.3 percent, year-on-year. Not too bad, we’d say, for a ship struggling to navigate through one of the most profound cultural transformations seen in recent Japanese corporate history. The October 2001 purchase of a controlling stake in J-Phone Co., Ltd. by the UK’s Vodafone Group — recently expanded to full ownership — has shook the Japanese opco to its core.

Insiders at the company have frequently spoken of the challenge in combining J-Phone’s local market expertise, tech standards, and way of doing business with the Vodafone Group’s worldwide plans, schedules, and standards.

But despite this, the company formerly known as J-Phone has maintained at least some initiative since Green took over.

In December 2002, the company opened its 3G W-CDMA network in Japan, offering, if no actual data services, then at least full roaming between Japan and the GSM world — a market first.

There were 8 million Sha-mail (picture mail) handsets in use by January 2003, a mega-pixel-class camera phone by May 2003, and 3G data services and an analog TV tuner handset in October 2003.

In May 2003, the company started its 256-kilobyte Java service, which has proved to be a solid, if modest, money maker for both the carrier and the participating application providers. DoCoMo has since aped this development by boosting Java downloads on FOMA.

Improvements continue to crop up. The V602SH and V601T, announced in May 2004, are the first 2G models on the market that can play Chaka-Uta realtone music clips, previously reserved exclusively for 3G’s bandwidth.

Ironically, most of these successes have come on the carrier’s 2G PDC network, indicating perhaps that the old J-Phone isn’t dead — it just couldn’t transition to 3G.

While they’ve been expanding network coverage, and fielding at least some cool 3G cellys (the V801Sh from Sharp is to die for), nobody in the market associates “3G” with “Vodafone” — a consumer mindshare problem of enormous magnitude.

In May, the company announced a rocking new advertising campaign using the hyper-popular stars Yu Yamada, Hiroki Narimiya, and Becky; the campaign will push music mobiles for Chaku­Uta, TV mobiles, and value in price services (the Family Discount and Happy Bonus discount). Sadly, none of this directly addresses the 3G mindshare gap (as these are all 2G services).

In the final analysis, almost everything the company did right under Green was related to 2G and his departure serves to illustrate a gapping and perhaps unsolvable 3G problem.

How badly is Big V hurting in 3G? In the entire month of May 2004, Vodafone added about as many new 3G subscribers (21,200) as competitors NTT DoCoMo and KDDI combined added, on average, in a single day (25,797).

We wish Mr. Green success in his future endeavours and if the board calls us, we can think of some worst enemies upon whom we’d like to wish the vacant Vodafone Japan CEO post.

— Daniel Scuka

Related posts:

1. After J-Phone’s Miserable Summer Vodafone KK is Born
2. Vodafone KK Announces New CEO
3. Viewpoint: 505iS or SOS call for 2G PDC?
4. Japan Approves Three New Groups for 3G
5. DoCoMo Pre-Christmas Press Briefing

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