Last year, Andy Halford played a key role in the third-largest corporate deal in history when Vodafone divested its 45% stake in Verizon Wireless for $130 billion. Now that he’s departed from the telecoms giant to become finance director of Asia-focused bank Standard Chartered, he reflects with Steve Dunkerley on the historic deal and some of his career highlights.
The telecoms industry is no stranger to big deals. A key moment came in 1984, when the US Government forced the break-up of AT&T into seven independent companies, known as the 'baby bells'. One of these companies was Bell Atlantic, which later became Verizon Communications, the 55% majority stakeholder of Verizon Wireless.
Fast forward to early 1999, when Andy Halford joined Vodafone as financial director for its UK operating company, and, within weeks, Vodafone was involved in a massive $70-billion acquisition of US-headquartered company AirTouch.
The UK telecoms giant was very adventurous, bidding its entire market capital to win the business, and it was only a few months later that the company bidding against Vodafone - Bell Atlantic - actually teamed up with them to form Verizon Wireless, which was the largest US wireless telecoms company.
The rationale for the joint venture was enhanced geographic coverage, as Bell Atlantic's wireless assets were based on the East Coast and in the Midwest, while Vodafone's new AirTouch was largely based on the West Coast. With Bell Atlantic contributing more geographic resources, Vodafone agreed to allow its US counterpart a 55% controlling stake.
"It was a deal with some pluses and minuses, because with that went a loss of absolute control, or at least the veto right of the operations of the business," explains Halford. "The right for them to decide what dividends would be paid out of the business also went."
During the time of this mega US joint venture, an even bigger deal was emerging: Vodafone's acquisition of the Mannesmann Group in Germany. By that time, Vodafone's market cap was $140 billion, and Mannesmann's was $160 billion. However, they couldn't get the Mannesmann management to agree to the bid, so they went hostile - the largest ever hostile bid against a German business - and won. Seeing the Vodafone group double and then quadruple in size, having only been in the business 18 months, was a whirlwind for Halford.
His focus, however, was in the US: in 2002, he became the CFO of Verizon Wireless and moved to New Jersey.
He recalls the growth and eventual divestment of the business: "I had the privilege of being the CFO of Verizon Wireless in its early days for three years, and it just truly grew into a phenomenal machine, to the point where it was ticking off about $1.25 billion in cash a month over the last couple of years," he recalls.
"The experience was interesting in that, first of all, I was the sole representative of one shareholder in a business that had many thousands of employees who were employed by the other partner in the joint venture.
"Also, I was part of a team that commercially kick-started a business into something that started an unbroken run of ten years' growth. Literally, from the first year, the business had EBITDA of about $6 billion to last year with $34 billion of EBITDA."
Vodafone's joint venture with Verizon Communications continued with the occasional demand from shareholders and Verizon Communications to consider an early sale. However, it wasn't until 2010 that, according to Halford, two important things happened.
The first was that the Verizon Wireless business became debt-free; and the second was Verizon Communications' other stream, a fixed-line business, was no longer generating much money. Yet, Verizon Communications still had an obligation to pay their shareholders about $5 billon of dividends a year, which meant they needed cash and were therefore keen for full control of Verizon Wireless.
"We had a fiduciary responsibility to evaluate offers, and, with Verizon Communications' offer of $130 billion, which was about nine times earnings, the risk of later regret was so low that this was a deal to be done," explains Halford.
With the deal completed, the challenge then was to decide what do with the proceeds. "We decided to return $84 billion of value to our shareholders and retain 30% of the money, which will enable us to halve the level of debt on our balance sheet, taking it down to the lowest levels we've had since 2005," he continues.
In terms of driving internal efficiencies and connecting the group, Halford is also particularly proud of Vodafone's business transformation, known as Project EVO. This involved a global SAP rollout, and the establishment of shared services and a procurement centre in Luxembourg.
With the group's access to considerable funds following the Verizon Wireless divestment, other notable deals have emerged, including the $10-billion acquisitions of Kabel Deutschland in Germany and Ono in Spain, fuelling speculation of a possible UK acquisition as Vodafone expands its European business. This is, of course, no longer a concern for Halford, as he has handed the CFO baton to his successor Nick Read.
"We had a three-month handover period, and Nick has been with the group for about 12 years, so he knows a huge amount about the role and the company," says Halford. "I have every confidence in Nick and that the momentum we recently gained will continue unabated under his leadership."