Stephen Scott: Vodafone

“I’ve got the best job in the world as far as general counsel are concerned. It’s in what I consider to be the most interesting sector in the world. You’re always dealing with new issues because it’s an area that pushes the boundaries and there are lots of areas where nobody’s been before. Why would I want to go anywhere else?” Vodafone Group general counsel Stephen Scott appears to be content with his lot.

If his comments make him sound smug, he is not. But he is very confident in the company that he has worked in for most of his life. He joined Racal Electronics in 1980. In 1991, Racal-Vodafone became Vodafone Group plc and demerged from Racal. Scott landed the general counsel job and has kept it ever since.

Scott heads the group legal department. There is also a separate UK legal department, created four years ago. Until then there was just one department for all legal services, but as the UK business developed it was felt that it needed its own dedicated resource. “I have a series of dotted lines from around the world from the legal directors of all our operating companies,” says Scott.

The group legal department is 60-strong, 45 of which are lawyers. That includes the company secretarial function of eight and the group insurance manager, who reports to Scott.

Nick Godwin, who also reports to Scott, is the legal director of group operations and has four teams reporting to him. These are the competition law team, the commercial law team, the intellectual property (IP)/IT team and the litigation team.

The UK legal department, which has 18 lawyers, operates as a completely separate entity. The UK team was headed by Ian Robino until Scott transferred him to head his IP/IT team. Osborne Clarke partner Simon Rendell has stepped in to fill the gap on secondment until a permanent replacement can be found.

“On a worldwide basis I’m responsible for all legal matters in which Vodafone and its operating subsidiaries get involved. The dotted reporting line that the UK legal head has to me is replicated by our operating companies around the world. They report in on a monthly basis formally and on a six-monthly basis in slightly more detail. Therefore, we keep a reasonably close eye on what’s going on in far-flung places where we have subsidiaries,” says Scott.

Scott chairs what he calls the group legal counsel, which consists of the legal heads of Vodafone’s larger operating companies in the UK, Italy, Germany and Spain. There is also a representative for the Asia-Pacific region as well as Scott and Godwin. The counsel deals with policy issues and meets five or six times a year.

Vodafone has around 200 lawyers worldwide. To make sure all are working in harmony, Scott holds a conference once a year where all 26 legal heads meet up for three days. This includes all subsidiaries and associated companies, which includes all networks in which Vodafone has an equity interest. In addition, Scott has six weekly conference calls with teams from around the world.

The head of corporate law also reports directly to Scott.
The corporate team supports the company’s many mergers and acquisitions, the corporate finance function and the treasury. It also works fairly closely with the secretarial team on statutory numbers.

The corporate team is “fairly busy”, says Scott. For a company renowned for its mega-acquisitions of companies such as US telco AirTouch, Germany’s Mannesmann and its recent failed attempt to buy AT&T Wireless, this seems a rather large understatement. The team has six lawyers, headed by John Loughrey, a US attorney inherited from AirTouch. Prior to the AT&T bid, the team completed the sale of Japan Telecom to Ripplewood Holdings in November 2003.

The focus that year was the buying in of a number of minority interests.

While the team is able to cope with most deals, on the big acquisitions it needs extra resources. When it comes to outside counsel, Vodafone calls on Linklaters. “Historically we’ve used Linklaters in the UK for corporate work. Historically in the US, we’ve used Sullivan & Cromwell. For the AT&T Wireless matter we needed another firm and I was instrumental in deciding where we went. Again, most of the big US law firms were involved with this matter in some shape or form, so the choice was fairly limited, but we were fortunate that Simpson Thacher was not conflicted,” says Scott.

“Broadly, if you’re dealing where Vodafone is dealing, in M&A transactions of the size that the AT&T Wireless transaction could have been – in the billions of dollars – you need the best. That’s where we start and finish,” continues Scott. “Linklaters advised the company on its flotation in 1988 and haven’t let us down in corporate transactions at all. As far as we’re concerned, if it’s not broke, don’t fix it. It doesn’t mean that we’re not harsh on them in terms of fees and requirements from time to time.”

He is not joking. “For many, many years Linklaters were our counsel, and if I got a general bill from Linklaters of £5,000 for the year it was extraordinary. That’s the way we are, because the basic philosophy is to do as much as we possibly can internally,” says Scott.

But transactions distort the group’s annual legal spend. Scott estimates that over the last three to four years, his average yearly outlay on transactional work was around £5m – “but it could be more than that”, he qualifies.

“Linklaters know they’ve got to remain competitive, but that said, the team that they’ve had with David Cheyne and now Iain Fenn are very responsive to us. So, until they completely drop the ball – and it’s not completely beyond the realms of possibility that one day they will – they’ll be the first place we’ll go,” Scott emphasises.

Scott has a particularly close relationship with Linklaters corporate head Cheyne. Despite the fact that Fenn has inherited the management of the relationship, Scott says: “My relationship with David’s pretty important. If David wasn’t at Linklaters then we’d have to reflect fairly hard.”

The competition team also uses Linklaters, but shares the burden with Herbert Smith and Freshfields Bruckhaus Deringer. Linklaters is likely to be chosen if Scott is creating a team for a transaction, but on issues where other expertise is needed, other firms may be called on.

“Certainly, cost is very important. We monitor our legal costs and we discuss costs with our legal advisers. The legal department isn’t immune. It’s what Vodafone is about – being the most efficient business it can be,” says Scott.

The competition team works quite closely with the corporate team on transactional work, but the mobile business is very heavily regulated, particularly by the European Commission, and the competition team has to stay on top of that.

There is a separate regulatory team, which reports to public policy director Stuart White rather than to Scott. “The line between regulation and the law is fairly clear in my view in that regulation is the law,” quips Scott. That aside, the lawyers support the public policy/regulatory team with the interpretation of the law, but this is primarily White’s responsibility.

“One of the wonderful things about Vodafone is that there’s very little internal politics and therefore the teams just get on and do what’s necessary,” Scott enthuses. “Everybody pretty much understands where other teams’ expertise lies.”

The commercial team has a fairly broad remit. Over and above its equity investments, Vodafone has a number of partner networks and contractual arrangements for the marketing of Vodafone branding. Capital expenditure on network infrastructure is more than £5bn and the commercial group deals with the procurement of that. There is also a great deal of licensing and marketing issues to deal with.

“The commercial team, broadly, is self-sufficient. It’s only in these arcane areas that it can get into from time to time where it might need some external support,” says Scott. It is often when foreign expertise is needed that a law firm’s assistance is sought, but most of the company’s contracting is done under UK law.

The IP/IT team has been formed relatively recently with a patent lawyer and three trademark lawyers. It protects Vodafone’s patent and trademark portfolio, is involved in data protection and the regulatory side of IT, and works on sponsorship deals.

There is a huge crossover between these teams. For example, large sponsorship deals such as the company’s sponsorship of Manchester United or Ferrari will involve members from all the legal teams.

Harbottle & Lewis advised Vodafone on its recent renewal of the Manchester United deal, but the Ferrari deal was handled in-house. Bird & Bird has also assisted Vodafone with its IT work.

Scott is expecting this fledgling team to grow. “Historically, Vodafone has applied the technology of others, but we’re now much more involved in the development of our own products and services,” he says.

Scott says that Vodafone does not have much litigation, but the litigation team has recently had a relatively high-profile contract dispute with Eddie Jordan, which went to trial. Herbert Smith advised on that dispute and has handled much of the company’s litigation work since it helped out with a spate of IP disputes around four years ago. “We’re not a litigious organisation,” insists Scott.

“Fundamentally, it’s about having a commercial attitude to life.”

Vodafone also has a small legal team of three lawyers on the West Coast of the US, a legacy of its 1999 merger with AirTouch. Soon after, though, the business was sold into a joint venture with Bell Atlantic (which changed its name to Verizon) to form newco Verizon Wireless. Vodafone has a 45 per cent ownership and Verizon has an east coast HQ, so Vodafone’s legal involvement is meagre. The small US team deals with legacy litigation and corporate governance.

“One of the challenges we have as a group is integrating across the various national boundaries,” says Scott. “We have 200 lawyers across the world and we don’t want duplication of work.” As Vodafone continues to acquire companies and expand its reach, this is the challenge that Scott thinks will keep him motivated, despite his many years at the top of the Vodafone legal tree.

Racal Electronics Group board bids for the private sector UK cellular
licence being offered by the UK Government.

The Vodafone analogue network is the first cellular network to
launch in the UK.

Paknet is formed as a joint venture between Racal Telecom and
Cable & Wireless.

Racal and Vodafone demerge fully. The Vodafone Group, as an independent company, is listed on the London and New York Stock Exchanges. At the time, this was the largest demerger in UK corporate history.

Vodafone and Telecom Finland sign the world’s first international general system for mobile communicators (GSM) roaming agreement. Vodafone buys the remaining 50 per cent of Paknet from Cable & Wireless and brings Paknet into the group as a wholly-owned subsidiary.

International partnerships are formed with consortia in Germany, South Africa, Australia, Fiji and Greece. As a result, Vodafone Group International is formed to acquire licences and supervise overseas interests.

International links continue to develop throughout the year, with interest in network consortia in the Netherlands, Hong Kong, Germany and France.

Chris Gent succeeds Sir Gerald Whent as chief executive officer.

Misrfone consortium, of which Vodafone has a 30 per cent interest, is awarded the licence to build a second mobile network in Egypt. The New Zealand GSM network is purchased.

Vodafone AirTouch, the largest mobile communications company in the world, is created as a result of the successful merger between Vodafone Group of the UK and AirTouch Communications of the US. It has a market capitalisation of approximately £90bn.

Vodafone acquires Germany’s Mannesmann. In June, agreement is reached for France Telecom to acquire Orange, which was purchased as a part of the Mannesmann Group. Verizon Wireless is launched in May 2000, the combination of Vodafone AirTouch’s and Bell Atlantic’s US cellular, portable communications system (PCS) and paging assets.

Vodafone acquires Ireland’s leading mobile communications company Eircell. Vodafone and China Mobile (Hong Kong) sign a strategic alliance agreement. The group completes the acquisition of a 25 per cent stake in Swisscom Mobile. Stephen Scott wins the In-house Lawyer of the Year award at The Lawyer Awards.

Arun Sarin succeeds Sir Christopher Gent as chief executive of Vodafone Group.

Vodafone loses $41bn (£22.86bn) bidding war with Cingular for AT&T Wireless in the US.

Stephen Scott
Group general counsel and company secretary

Organisation Vodafone
Sector Telecoms
Employees 12,000 (UK), 70,00 (globally)
Annual turnover £30.37bn
Legal capability 45 (Vodafone Group), 200 (globally)
Group general counsel and company secretary Stephen Scott
Reporting to Chief executive Arun Sarin
Main law firms Bird & Bird, Freshfields Bruckhaus Deringer, Harbottle & Lewis, Herbert Smith, Linklaters and Sullivan & Cromwell