How not to blink

Vodafone: Vodafone and "forced seller" are hardly the words that the mobile operator's chief executive would want in any headline, even if linked by the word "not". But that's the position Vittorio Colao finds himself in following an interview with the Financial Times. A small band of shareholders has kicked up a fuss about Vodafone's previous acquisition mania which has left the group looking a bit like an investment trust. The stock trades at a stubborn discount of 15-20 per cent to the sum of its parts, according to a Breakingviews analysis.

Colao recently sold the group's minority stake in China Mobile for a good price. He understandably doesn't want to be under pressure to sell the even bigger stakes — a 44 percent shareholding in France's SFR and, critically, a 45 per cent position in Verizon Wireless. In each case, there is only one buyer - Vivendi and Verizon Communications, respectively. The key to realising full value is not to blink in what could be a long staring game.

Colao's own views may be clear. But his potential weakness is revealed in his quote to the FT: "Vodafone will not be - or at least Vittorio Colao does not want to be - a forced seller." The telecom group's boss has admitted, probably unconsciously, that the decision may not be entirely his. In order to stay the course, especially with Verizon Wireless, he will need the support of a strong chairman. And his current chairman, John Bond, is somewhat damaged following an unsuccessful attempt to dislodge him in July's annual shareholder meeting.

Vodafone does, however, have the chance to provide its boss with the necessary air cover. It is currently recruiting a senior non-executive director who is expected to take over from Bond. It is critical that this person has strong credibility with shareholders so that when the chairman says "give Colao some time", he or she is heeded. If Vodafone can credibly play the long staring game, it may even not even have to wait interminably before the other side comes to the negotiating table.