Vodafone chief’s £45m bonanza

ARUN SARIN, chief executive of the mobile-phone giant Vodafone, is poised to reap a £45m bonanza from the turnround in the company’s fortunes.

The size of his potential windfall – the value of shares and options in the company – has soared as Vodafone’s stock has marched ahead. Vodafone shares, 188½p, have risen 33% in the past 12 months, beating by a huge margin the FTSE 100, which advanced less than 4%.

Sarin could exercise share options worth £10m immediately. Depending on whether he meets performance targets, he could cash in the lot if he stays around until the summer of 2009.

The Indian-born boss had planned to step down in the summer of 2008 after almost five years, but sources say he has been asked to stay on by Sir John Bond, the chairman, who helped him regain investor confidence.

Shareholders are unlikely to begrudge him such a haul, even though they have clashed with the company over excessive pay in the past.

This year has been a sharp contrast to 2006, when Vodafone shares flatlined, falling 1.5%.

Then, Sarin was battling on several fronts, not least in the boardroom. Investors were disgruntled by slowing growth in Europe and huge writedowns in asset values – a legacy of his predecessor, Sir Christopher Gent.

Sarin sold off underperforming or part-owned assets in Japan, Switzerland and Belgium and ousted old-guard executives, including marketing director Peter Bamford and technology boffin Thomas Geitner.

Vodafone’s shares have risen as investors have switched to defensive stocks, including telecoms. But the turnround is also due to bets on fast-growing markets such as India and Turkey paying off. Sarin has also slashed costs in mature European markets, and he raised the dividend by 11% in May.

He told The Sunday Times in September: “I feel well supported by shareholders and very well supported by my board.”

Going into 2008, there is still significant uncertainty in some key countries. Vodafone is unlikely to increase its stake in 45%-owned Verizon Wireless, its American joint venture, which does not pay it a dividend. In France, Vivendi is keen to buy Vodafone’s stake in SFR. And talks to take control of Telkom in South Africa have foundered.

Elsewhere, Sarin sees a £7 billion stake in China Mobile as a useful bargaining chip in a restructuring market.

His £45m windfall includes shares that Sarin owns outright, worth £11.4m. Another £3.6m is tied up in the deferred bonus scheme. Two more tranches of share options, worth £8.7m, are exercisable in summer 2008 and 2009, depending on earnings-per-share growth.

Sarin also has performance shares totalling £11.8m. However, these are linked to share-price growth against a group of comparable companies. In 2006 he picked up only 26% of his award. For 2007, to be divulged in the next annual report, he is expected to have picked up half the full amount, worth £1.9m at today’s prices.

Sarin became independently wealthy with the sale of Air-Touch, the American business of which he was president, to Vodafone. He subsequently made a profit of £16.9m from share options in 1999.

While chief executive of Vodafone, however, he has a track record of rarely selling shares.

Source: Times Online