Tag Archives: Vodafone

A Brief for Mr. Kleisterlee

Last week, Vodafone Group announced that Gerard Kleisterlee would replace outgoing Chairman of the Board Sir John Bond. This should be welcome news for shareholders. The Ontario Teacher’s Pension Plan, which led a vote against Bond at last year’s Annual General Meeting, protested that the telecommunications firm currently suffers from “significant structural and strategic weaknesses,” and complained publicly of Vodafone’s “long history of poor capital allocation and disastrous M & A.” The board, they averred, was in need of “rejuvenation” and the company in need of restructuring.

From all appearances, Mr. Kleisterlee is the man for the job.

Kleisterlee gained his reputation at Philips, where as CEO he performed a masterful and unsentimental overhaul of the ungainly conglomerate, getting Philips out of the semi-conductor, component and television business, introducing new licensing agreements, and simplifying Philips’ business operations from eight to three units. Not known as a “gung-ho dealmaker,” Kleisterlee nevertheless demonstrated an intelligent approach to M & A. He is rightly credited with saving Philips from itself and returning the company to growth. Analyst Will Draper sees him as a strong ally for Vodafone’s current CEO, Vittorio Colao, who is trying to reposition the firm around core geographies, revamp the Vodafone brand, and make headway in emerging markets.

When it comes to emerging markets, Kleisterlee will have his work cut out for him. India has been an especially troublesome spot, where Vodafone has fought a pitched battle over taxes from a 2007 acquisition, dealt with some unscrupulous regulators, and is now contending with the ugly unraveling of Vodafone Essar, a joint venture. But for Vodafone’s new chairman getting things squared away in India will be only one aspect of a much bigger emerging markets story. Eventually Kleisterlee is going to have to come to terms with other aspects of that story, and notably with Vodafone’s actions during the uprising in Egypt.

That is, I suspect, where Mr. Kleisterlee will find one of his most difficult briefs. The company’s human rights record in Egypt has come in for some strong and well-deserved criticism. (The two are not necessarily the same.) Officially, Vodafone claims to have had no choice but to comply with Egyptian authorities in shutting down its mobile network and allowing the government to send SMS messages that precipitated a violent crackdown.

Vodafone Group has protested to the authorities that the current situation regarding these messages is unacceptable. We have made clear that all messages should be transparent and clearly attributable to the originator.

The company has consistently taken refuge in the government’s “technical capability” to override and shut down their network. There was nothing they could do, they explained, without putting their own employees’ lives in danger.

But they have not yet answered some serious allegations, like those made by Hossam Bahgat of the Egyptian Initiative for Personal Rights. Bahgat claims that Vodafone “selectively severed phone access for human rights defenders, lawyers, and political activists starting on Tuesday,” January 25th, blocking SIM cards and rendering human rights workers’ phones useless when they most needed them.

Others have asked whether Vodafone did more than merely comply: were they in some way complicit? That was the tenor of the discussion on a Facebook page in the run up to a demonstration at Vodafone headquarters in London; and it continues to be the tenor of the “Vodafail” Global Boycott and Protest. There were even rumors online of secret police running the Vodafone Egypt core room in Cairo, but nothing that could be verified. Access Now rebuked the company for silently tolerating – assenting to — emergency rule in the first place: “decades of emergency law suited Vodafone when they were making billions of profit in Egypt,” reads a strident email promoting one of several online petitions. But as I noted in a previous post, it is not at all clear the people gathered in Tahrir Square would be better off now had Vodafone and other mobile providers never done business with Mubarak’s regime.

Much harder to quarrel with is Salil Tripathi at the Institute For Human Rights and Business in London. He asks, very sensibly, whether Vodafone could have done more to create transparency – to alert customers of impending shutdowns or government interference with the network – and, more importantly, whether they gave any serious thought to developing a “human rights framework” before entering into business with the Mubarak regime.

On this front, Kleisterlee has to fight more than a public relations battle. To be sure, Vodafone’s public response to events in Egypt will send a strong signal to mobile customers in Egypt or Vodafone customers around the world. (Americans rushing out to buy Verizon iPhones might pause to consider that Verizon Wireless is a joint venture with Vodafone – though I have no illusions that that will slow the stampede.) Egypt will also factor into any effort to re-brand the company, and if Mr. Kleisterlee and Mr. Colao intend to make the Vodafone brand synonymous with “mobile data and network quality,” it would make good sense to look closely and seriously at how data and networks played into events in Egypt. One message from Tahrir Square is that data doesn’t just move through networks: a network always touches and is embedded in human situations; and data alters and is altered by its situation. The quality of a network should not be measured simply in terms of signal strength; the privacy and security afforded users of the network also matters, in Egypt and elsewhere. How do these basic rights figure into Vodafone’s promise of “quality”? How is Vodafone going to respect and protect these rights?

Dodging the question won’t do. Blaming bad governance on Bond’s part only begs the question what good governance will look like under Chairman Kleisterlee. Pace Martin Sorrell, who wrote an apology for Vodafone in the London Times, there is no avoiding the “de facto editorial and political judgments” that Google, Twitter and Facebook have made in providing technologies and services to organizers in Tahrir. Denying service in compliance with the Mubarak regime also involves a political judgment, and trying to avoid what Sorrell calls “unintended consequences” is itself an act –a cowardly evasion – with social and political consequences. Limiting exposure to risk is not simply a matter of seeing no evil; and taking intelligent risks, with an eye to the future, and a nuanced understanding of how the world is changing, is the very essence of good judgment.

No business operates in a neutral zone, on a holiday from history. If Vodafone wants to compete in emerging markets, then the company has to earn and keep the trust of people in those markets, prove that they share their aspirations for a better life, and acknowledge that they have a stake in whether people living in those societies suffer or thrive. At this year’s Annual General Meeting, shareholders deserve to hear whether Vodafone is a relic of Egypt’s past, or invested in its future.

Doing Business With Bad Regimes: Vodafone in Egypt

Last Friday, Access Now put out a link to a petition urging Vodafone, Orange and all ISPs and mobile operators in Egypt to “get Egypt back online.”

We call on you to immediately open the Egyptian telecommunications networks. We ask that you stand firm against the Egyptian government and allow the people, and your customers, to communicate freely and openly at this vital time.

On the face of it, putting pressure on ISPs and telecoms companies operating in Egypt seems to make good sense. One might assume that appealing to Western companies might be more effective than putting pressure on Mubarak, which is what President Obama tried to do last week when he urged the Egyptian government “to reverse the actions that they’ve taken to interfere with access to the Internet, to cell phone service, and to social networks that do so much to connect people in the 21st Century.” (The President failed to persuade Mubarak, but inspired Steve Denning to float the idea in a column on Forbes.com that Internet access may be “a basic human right.”)

It’s unclear, however, how much the ISPs and mobile telephone companies operating in Egypt can do. On Saturday, for example, Vodafone Egypt announced that they had resumed services but expected further interruptions, and they explained their decision to take the network down as a pre-emptive move:

Statement – Vodafone Egypt
Saturday 29 January 2011. Vodafone restored voice services to our customers in Egypt this morning, as soon as we were able.
We would like to make it clear that the authorities in Egypt have the technical capability to close our network, and if they had done so it would have taken much longer to restore services to our customers.
It has been clear to us that there were no legal or practical options open to Vodafone, or any of the mobile operators in Egypt, but to comply with the demands of the authorities.
Moreover, our other priority is the safety of our employees and any actions we take in Egypt will be judged in light of their continuing wellbeing [sic].

Salil Tripathi at the Institute for Human Rights and Business takes issue with this official statement, saying that Vodafone could have done more before “instantly” complying. Why didn’t they “push for answers” by asking the Egyptian state to provide instructions in writing and explain its rationale? Why didn’t they more forcefully argue the case for keeping service uninterrupted? At the very least, he says, they should have warned their Egyptian customers before shutting down.

These recommendations would seem sensible enough, but for the fact that the Egyptian authorities, according to Vodafone, have the “technical capability” to shut down the mobile network. (I am unclear why it would be even more difficult for Vodafone to restores service after a government shutdown, but I imagine it has to do with the fact that a government shutdown would not exactly proceed in a careful and methodical way.) If this is true, and Vodafone is not just taking refuge in technical hocus pocus, then no amount of protesting or arguing or pushing for answers would really matter, when push came to shove. It’s easy to imagine that defying the Mubarak government, refusing to comply, or delaying would put Vodafone employees at risk. Affiliation with a Western company is no guarantee of safety or immunity; consider the fate of Google’s @Ghonim.

John Morrison, Executive Director of the London-based Institute, followed up on Tripathi’s remarks with a letter to the Financial Times in which he pointed out that Vodafone’s “dilemma could hardly have been unexpected,” and telecoms and ISPs should exercise due diligence before doing business in a place like Egypt (or China, Iran or Sudan). “The clash between local law, albeit that of an authoritarian regime, and international law will be a key theme for the information and communication technologies sector for years to come,” he writes.

These companies will need to exercise comprehensive human rights due diligence before signing contracts with the governments or joint venture arrangements with national companies. The risks need to be managed as effectively as possible in the wording of the contracts themselves, something that is rarely the case at the moment. Without such action by the industry, some will say that UK or European Union law should be amended to require them to do so.

It is not too much to ask a company wishing to do business with an authoritarian regime to balance concerns about human rights and international law with its business interest. But that balance may be very difficult to strike, and due diligence should also take into account the crucial role mobile telephony and information technology have already played in opening closed societies.

Let’s say, for example, that Vodafone did human rights due diligence before signing a contract with the Egyptian government, and decided that the risks were too great – or that it could not include meaningful human rights agreements in its contract with the Egyptian government. Would it then have been better for the company to decide not to do business in Egypt? Would Egyptians really be better off today if Western mobile operators had decided, long before the events of January 25th, that it was just too risky, or too difficult, to do business in Egypt?

To ask the question is not to apologize for Vodafone. But it is worth asking what sorts of compromises are acceptable, especially since mobile telephony and mobile-based services like SayNowhave stepped into the breach now that Egyptian ISPs are offline, allowing Egyptians to communicate – albeit not without interruption – with each other and with the outside world.