Life 2.0

NEW DELHI -- Thirty years after he left India for a life in the U.S., Arun Sarin is counting on his native country to revive his company.

As chief executive of Vodafone Group PLC, Mr. Sarin is battling to conquer India, one of the last big frontiers in the cellphone industry. Vodafone's $10.9 billion investment in Indian cellphone company Hutchison Essar Ltd., unveiled one year ago this month, was the country's largest-ever foreign investment. Now, a raft of telecom companies are eyeing India, including AT&T Inc., which recently applied for a license to sell service in the country.

Mr. Sarin's move reflects a new development in the globalization of India's economy. As Indian-born executives increasingly occupy top positions in the West, some find themselves heading back into India to expand their businesses. The hope is that they can bring with them an insider's perspective, and a possible edge over global competitors.

Having an Indian voice in the boardroom increases the comfort and likelihood of doing deals in India, says Tarun Khanna, a professor at Harvard Business School who was born in New Delhi and is now a U.S. resident. "It hastens the integration of India into the world economy," he says.

Whether Mr. Sarin's roots will help ensure success in India remains an open question. The market is fiercely competitive -- customers pay roughly two U.S. cents a minute, one of the lowest rates anywhere -- and is dominated by large, family-run companies that can hold considerable influence. In recent weeks, the government issued new licenses to several Indian and foreign wireless companies, meaning the number of competing carriers is expected to rise.

Still, early signs are positive. Vodafone last month said sales in India grew 56% in the quarter ended Dec. 31 over the year-earlier quarter, compared with 2.2% growth in Europe. In Germany, Vodafone's largest market by revenues, sales fell 5.2%. Already, India has become one of Vodafone's biggest markets, with 40 million customers.

Before the India acquisition, Mr. Sarin, who now lives in England, where Vodafone is based, had only been back for occasional visits since he left for California in 1975. Recent articles in the Indian press have labeled him critical of the government after a set of public remarks he made. And some observers say he is a step behind some local telecom companies when it comes to navigating India's complex regulatory system.

Mr. Sarin says he believes his roots give him "empathy for emerging markets," and initially helped him persuade others within Vodafone that the company needed a bigger presence in the developing world. Vodafone, the world's largest wireless-service provider by sales, faces a fundamental problem: Growth in its core European markets is slowing. By contrast, India is adding about eight million cellphone subscribers per month.

The pressure is now on Mr. Sarin to show the acquisition can pay off. His reputation at Vodafone so far has been uneven, and some shareholders have complained that he has been slow to react to key issues, including a sharp decline in call prices in Europe.

Mr. Sarin, 53 years old, was born in Pachmari, a small military town in the hills of central India. His father belonged to a once-wealthy Indian family and joined the army after his own father's business fortunes declined along with Britain's colonial rule.

At age 8, Arun was sent to a British-style military boarding school in Bangalore. His days started with an early morning wake-up bugle call followed by a two-mile run and push-ups before a day of classes, sports, "prep" (an English term for homework), cold showers, and shoe-shining before 10 p.m. lights out.

Hazing was commonplace, says Mr. Sarin. "You learn very quickly how to get along with everybody because if you don't, you can't survive."

When he graduated at age 15, he planned to join the air force, but his mother vetoed the move. Instead, he studied engineering at the elite Indian Institute of Technology in Kharagpur, where he also played drums in a rock band. Seeing limited business opportunities in India in the 1970s, he followed many of his peers to the U.S. for graduate school. He earned master's degrees in engineering and business administration at the University of California, Berkeley. At a dorm social there he met his now-wife, Rummi, who also is Indian-born.

After his first child was born, Mr. Sarin became an American citizen in 1987. He bought homes in San Francisco and Hawaii, joined golf clubs and started collecting art by California impressionists such as Alfred Mitchell.

Berkeley is where Mr. Sarin came to identify with what he considers American values: a hard-working ethic, openness and egalitarianism. America's "go-getting values [were] what I was drawn to," he says. He describes Indian values as "integrity, humility, a pretty heavy dose of fatalism," of which he says he has bits of the first two but is "not into fatalism at all."

During the 1980s and 1990s, Mr. Sarin worked as a deal maker, among other roles, at a San Francisco carrier called Pacific Telesis Group and then at its wireless spinoff AirTouch Communications Inc.

Mr. Sarin became AirTouch president and chief operating officer in 1997. After Vodafone acquired the company in 1999, he was briefly head of U.S. and Asia Pacific operations, stepping down in 2000. Mr. Sarin made tens of millions of dollars from the sale, according to regulatory filings and Mr. Sarin.

In 2003, when Vodafone's CEO retired, the board tapped Mr. Sarin for his industry experience and familiarity with Vodafone, says Lord Ian MacLaurin, Vodafone's chairman at the time.

Mr. Sarin moved to the U.K., settling in Surrey, a scenic and affluent county outside London. A decent golfer with a 15 handicap, he joined the nearby Queenwood golf club, an exclusive establishment with a large, American-style club house popular with hedge-fund managers.

At Newbury, England-based Vodafone, Mr. Sarin took over a company at a crossroads. With growth slowing, he needed to find new ways to reinvigorate the business. A bid to acquire AT&T Wireless in the U.S. in 2004 failed. Vodafone's Japan unit started struggling.

Investors began complaining. At the company's annual meeting in July 2006, several large shareholders voted against re-electing Mr. Sarin to the Vodafone board. Vodafone "wasn't being run as it should be. It was no longer a growth business," says David Lis, a London-based fund manager at Morley Fund Management, which voted against Mr. Sarin.

Lord MacLaurin says Mr. Sarin is "a very good people person" and optimistic, but that his tendency to paint situations in a positive light hasn't always endeared him to investors. In a May 2005 conference call, for example, Mr. Sarin said "within this year we will have completed our turnaround" in Japan. But 11 months later, Vodafone sold the unit.

Mr. Sarin stepped up efforts to cut costs in developed markets and put resources in high-growth emerging markets. Since the beginning of 2006, Vodafone has invested almost $19 billion in wireless businesses in India, Turkey and South Africa.

He spotted his chance in India in November 2006 when he learned that a unit of Hutchison Whampoa Ltd. of Hong Kong was considering selling its stake in Indian wireless carrier Hutchison Essar.

Indian law requires foreign telecom companies to have a local partner and restricts their ownership stakes to 74%. In looking for a partner, Mr. Sarin started with the most obvious candidate: Essar Group, a conglomerate owned by Mumbai's wealthy Ruia family, which already owned a 33% stake in the company. Mr. Sarin approached the Ruias about staying on as a partner. They rejected Mr. Sarin's advances, saying they hadn't ruled out making their own bid for Hutchison's stake.

Vodafone eventually won the bid after it valued the company at more than $2 billion higher than Mr. Sarin's initial offer of $16.5 billion. The Ruias threatened to take legal action to block the deal, citing their contractual rights to match Vodafone's bid. Mr. Sarin got on a plane to continue lobbying the family. During a Valentine's Day visit to Delhi in 2007, he invoked the holiday by joking to reporters that he would send the Ruias roses.

The negotiations dragged over the following weeks. The Ruias agreed to become Vodafone's local partner after Mr. Sarin offered them an option that lets them sell up to $5 billion of their shares to Vodafone after three years. Mr. Sarin met with India's prime minister to seek his blessing.

Suhel Seth, managing partner of Counselage India, a strategic image and brand consulting firm in Delhi that works with Vodafone and several American companies, says Mr. Sarin understands more than most the need for patience in dealing with the Indian system. Western-born executives often are impatient, Mr. Seth says. He says that helped Mr. Sarin when he was waiting for the Indian government's Foreign Investment Promotion Board to approve the deal, which took several months: "He behaved like an insider."

Still, Mr. Sarin has expressed frustration at the interference he faced during the process from rivals seeking to scupper the deal, calling them "the billionaire losers' club" during a presentation to a conference in Silicon Valley.

The comments, made last summer, spurred a flurry of stories in the Indian press that caused Mr. Sarin to clarify that he was not criticizing the government. "We have great respect for the role of the Indian authorities in scrutinizing transactions such as ours, in accordance with Indian law," he said in the statement issued to Indian media.

More recently, Mr. Sarin lost a battle to prevent regulators from issuing new licenses to competitors. Vodafone spokesman Bobby Leach says that while Mr. Sarin does meet with regulatory authorities and ministers, specific issues are the responsibility of local management teams.

Mr. Sarin says he keeps a watchful eye on the India business. During one trip late last year, Mr. Sarin shuttled between the offices of the finance minister, the telecoms minister and commerce minister in Delhi to lobby for more wireless spectrum, an important issue for Vodafone as it tries to quickly expand its customer base. He later wrote to the Indian prime minister to press the issue.

In October, Mr. Sarin flew to Mumbai to attend an engagement party for the daughter of his business partner, Ravi Ruia. "The family is an important entity in Indian business," Mr. Sarin says. Many of the biggest Indian firms are run by families with large ownership stakes. That includes titans like the Mittals, the Ambanis, and the Ruias in the telecom market.

Sunil Mittal, chairman and CEO of Bharti Enterprises, which owns India's largest wireless operator Bharti Airtel Ltd., says Mr. Sarin brings a "blend of Indian heritage and good Western practices" such as rigor and discipline, to the table. He says after Vodafone won the bid for the Indian business last year, Mr. Sarin told him, "I want to be No. 1 in India." Mr. Mittal's response: "I welcome you to be a strong No. 2."

Mr. Sarin has been busy courting the local press, sometimes speaking a few words of Hindi during media gatherings (his native tongue is English). At a lunch in Delhi for editors of Indian newspapers, he outlined Vodafone's plans to set up a local charitable foundation with $10 million.

Vodafone embarked on a massive branding blitz to establish its name and red logo across the country. Vodafone changed signs at roughly 400,000 retail outlets across the country in just a few weeks and bought all the commercials for a 24-hour period on one of India's most-watched television networks.

Among Vodafone's current customers is Naresh Kumar Titoria, a pathology lab technician at Himanshu Diagnostics Centre in New Delhi. Mr. Titoria, 27, says the company's wireless coverage in Delhi is better than some competitors, but on a recent trip to a district in the state of Uttar Pradesh, the service was poor. " Airtel is No. 1 because it works equally well everywhere," he says. Vodafone says it currently operates in about two-thirds of India's regions, but is expanding its network and plans to launch in most other regions later this year.

During a visit to India in September, Mr. Sarin rallied local employees from a makeshift stage at the company's headquarters in a converted textile factory in Mumbai. On the same trip, he visited one of the newly branded stores in a busy Delhi mall. He posed as a customer, taking a number and waiting in line.

Vodafone Essar, as the company is now called, has gained market share, jumping to 17.1%, as of December, from 16.5% at the start of 2007, says Kunal Bajaj, a Delhi-based analyst at research firm BDA China Ltd. It is the third-largest service provider behind Bharti Airtel Ltd. and Reliance Communications Ltd., which have 23.6% and 17.5% market shares, respectively.

As Mr. Sarin approaches his fifth year as Vodafone's CEO, he says he plans, in time, to return to California where he might consider working in private equity, among other options. "I'm not going to be here for many years," he says. But he adds, "There is a little more work to be done."

Krishna Pokharel contributed to this article.

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