Vodafone Tears Down Its Walled Garden

When Apple in 2007 offered Vodafone a two-year deal to become the exclusive British operator of the iPhone, the European telecom giant took a pass, ceding the opportunity to Madrid-based Telefónica. The iPhone, explained then-Chief Executive Officer Arun Sarin at a board meeting, would be so costly that it would never take off, according to a person present at the meeting. Without much discussion, the board moved on to the next item.

Talk about a dropped call. Telefónica’s sales in the U.K. soon surged, and Vodafone’s languished, as the iPhone quickly became one of the most popular gadgets of all time. Vittorio Colao, a former McKinsey consultant who became Vodafone CEO a year after the iPhone misstep, has spent much of his tenure trying to undo the damage from that decision and unwind a “walled garden” strategy that restricted some services and made it more difficult for customers to purchase apps and content from anyone but Vodafone. In recent months, Colao has been busy nudging the company, with market capitalization of $132 billion, deeper into the lucrative global mobile data market, even if that means striking alliances with rivals. This summer, Vodafone opened a research center in Silicon Valley to be closer to app developers, and it invested in a U.S. company that helps give doctors access to patient data via mobile devices.