Vodafone's incoming CEO - what can we expect?

At the end of this month Chris Gent will hand over his CEO office at Vodafone to Arun Sarin. But what do we know of the man charged with leading the mobile giant forward? Eric Abrahamson and Louis Galambos, who have studied the careers of Sarin and Gent for some time, fill in a number of blanks…

Two years ago Arun Sarin was not a happy man. Fate seemed to be working against him. Once the heir apparent to the largest wireless company in the world – AirTouch Communications – he lost his chance to lead when Vodafone bought AirTouch for £42.7 billion in 1999. An interlude as CEO of wireless services provider InfoSpace ended in disaster in January 2001. After taking a few months off, he joined investment banking firm KKR to run a telecom venture fund but doing deals and playing some extra golf weren’t about to satisfy a man who wanted to be running a 'world-beating' organisation.

Remarkably, Sarin got his wish: at the end of this month he takes over as CEO of Vodafone, the largest wireless company in the world. For many in the United Kingdom, Sarin is an enigma, an India-born, US-trained corporate executive who has kept a relatively low profile in recent years. To anyone who knows his background, however, the path he is likely to walk as Vodafone’s CEO is clear, as is the remarkable story of defeat and eventual triumph that has always characterised his life.

An opportunist who believes in fate, Sarin grew up in India in a family that had known both fortune and failure. Once wealthy, his family lost everything in the partition of the Indian subcontinent. His father and uncles maintained their status and families by becoming high-ranking officers in the army. Sarin, who was sent to military boarding school as a boy, aimed to follow in their footsteps. But his sharp mind and a mother who did not want to risk losing both her sons in war put Sarin on a path to engineering instead.

Educated at the elite Indian Institute of Technology in Kharagpur and the University of California, Berkeley, he emerged from his schooling with a strong background in technology and the tools of modern management. Hired by Pacific Telesis, one of the seven Baby Bells created by the breakup of AT&T, he entered the wireless industry in 1984 at the dawn of a new era in telecommunications. Deregulation, privatisation and competition were sweeping through the US industry putting enormous pressure on old-line telephone companies to change. Sarin became an agent of change but he combined a zest for innovation with a deep appreciation for the technical style and disciplined management that were hallmarks of America’s Bell System.

A brash, newly-minted MBA with incredible drive and an effervescent personality, began his career in wireless. At that time far-sighted companies like McCaw Communications and Pacific Telesis were moving aggressively to acquire local operators. Sarin’s job was to help Telesis build a larger system by identifying, valuing and taking over these wireless companies.

In this entrepreneurial era of wireless, as Sarin has said, assets rather than operations were the driving force in the business. What the Bell companies brought to the enterprise were substantial assets, long experience with operational discipline, and a deep knowledge of network systems. What they lacked was an understanding of bottom-line financial management in a competitive market environment. Promoted to chief financial officer of the wireless business in 1986, Sarin imported the talent he needed, integrated the venture’s systems and introduced a strong sense of bottom-line responsibility.

As his managerial skills became evident Sarin benefited from the accelerated management program employed in the Bell System. He was quickly promoted and given a variety of responsibilities – from finance to strategy to operations. Moving from wireless to the wireline world of Pacific Bell, he used his position as head of corporate strategy and then chief financial officer to brace the company for the new age of competition in telecommunications. When Pacific Telesis’ CEO Sam Ginn made a decision to spin the company’s wireless operations in 1994, he picked Sarin to play a leading role in creating the structure and culture of the organisation that became AirTouch Communications.

Sarin wore many hats in the early days of AirTouch but much of his energy was focused on rationalising the company’s international operations. AirTouch had successfully developed multinational partnerships that won important wireless licences in Europe and Asia. By the mid-1990s, these systems were finishing construction and launching commercial operations.

As the new president of AirTouch International, Sarin developed strong operational controls and emphasised the necessity to meet performance objectives. At a time when all of the large international wireless operators were struggling to deal with the problems created by complex partnerships and minority stakes, Sarin’s international background and management style helped AirTouch meet the challenge of running this new type of multinational organization efficiently. His success led CEO Ginn to make Sarin president and chief operating officer of AirTouch in 1997.

As heir apparent, Sarin had mixed feelings when Vodafone bought AirTouch two years later. To his credit, he worked hard to ensure the successful integration of the two companies. He backed Vodafone’s agreement with Bell Atlantic to combine their US assets to create Verizon Wireless – even though it put him out of a job. When Vodafone offered its enormous bid for Mannesmann in the autumn of 1999, Sarin played a key role in winning the hearts and minds of Mannesmann’s American shareholders. Yet this whirlwind game of musical chairs left Sarin standing alone.

Vodafone CEO Sir Christopher Gent outlined a plan to name Sarin chief operating officer of the combined organisations within a year or so. Gent speculated that he would be ready to retire by 2003 and said that Sarin would succeed him. But the commitment was not firm and in the meantime Sarin’s role was uncertain. He also doubted that Gent would be ready to step down so soon.

Rather than wait, he accepted the job as CEO of InfoSpace, a wireless services provider whose stock was hot at the top of the dot-com boom. When the market collapsed later that year, Sarin and a number of senior officers at InfoSpace left the company in a conflict with the founder. In an interview in August 2001 Sarin’s frustration was palpable. He described Chris Gent as “the luckiest guy on the planet”. And to a man who believes in fate as well as opportunism, this was no insult.

Sarin’s own remarkable turn of fortune owes much to Gent’s foresight and the bond the two men had developed. When Sarin decided to leave the company in 2000, Gent persuaded him to remain as a non-executive member of the board of directors. In this role, as Vodafone chairman Lord Ian MacLaurin puts it: “He wasn’t the typical non-executive director. He knew all the people. He had worked with many of our licence partners in Europe and the United States. He knew the personalities. He lived and breathed telecommunications and he was always his own man – totally.”

Last spring, when Gent informed his chairman that he wanted to retire in 2003, MacLaurin engaged an executive search firm to identify candidates for the CEO’s job. At the same time, he invited any board members interested in being considered to talk to him. Sarin put his hat in the ring. The board narrowed the search to a handful of strong candidates but Sarin was the hands-down favourite.

MacLaurin explained succinctly: “He has a clear vision of the future. He knows the industry worldwide. He understands the technology. I don’t think you can find anyone better in the world.”

Sarin has lately kept his vision of the future close to his chest but two years ago he was remarkably candid, if not prescient, about Chris Gent and Vodafone. Paying tribute to Gent, he said: “He’s very cleverly put it all together and from now on it’s kind of a management operating job.”

Analysing Vodafone’s performance and prospects: “What we have now is just strong operations in a bunch of countries. When aggregated, they produce phenomenal results. But it’s not a world brand, a world-integrated company and won’t be for a long period of time.” Little did he know at the time that he was outlining the future for his own tenure as CEO.

For the wireless industry as a whole Sarin’s accession to the top job at Vodafone signals an historical transition. The 20-year entrepreneurial era is drawing to a close. Operations have replaced assets as the industry’s driving force. As telecommunications emerges from the financial crisis of the last three years, we can expect another wave of global consolidation in wireless and the emergence of a new cadre of leaders who, like Arun Sarin, will look for economies of scope and scale in global operations. By blending the operational and technical strengths of the old Bell System with the vision and energy of the entrepreneurial era in wireless, Sarin is well positioned at Vodafone to achieve his career-long goal of building a world-beating organisation.

Eric John Abrahamson and Louis Galambos are the co-authors of Anytime, Anywhere: Entrepreneurship and the Creation of a Wireless World (Cambridge University Press), a book that unravels the evolution of the early years of the wireless industry from the perspective of one Baby Bell.