TanyaT
26th July 2005, 10:01
WHY VODAFONE SHOULD HANG UP ON MALCOLM GLAZER:
Vodafone’s sponsorship of Manchester United was once a near-perfect partnership, with both companies sharing strong brands and successful financial performance. However, since the hostile takeover of Manchester United by Malcolm Glazer in May/June 2005, Vodafone now runs the serious risk of being closely associated with a severely tainted brand.
Glazer has turned the most successful and profitable football club into the most debt-laden by buying United with vast amounts of borrowed money and transferring those potentially crippling debts onto the club’s books. In order just to service the interest on these enormous loans, Glazer’s United will have to raise income drastically in a very short space of time. Most financial analysts and industry experts insist that this simply cannot be done and that within three years United could face financial meltdown. It would be the most disastrous and high-profile collapse sport has ever seen.
Vodafone’s public image in being associated with such a collapse would undoubtedly suffer. What’s more, with so many United fans unhappy with Glazer’s takeover, it is likely that many will either cancel their Vodafone contracts or be reluctant to buy Vodafone’s MU Mobile products and services, a key aspect of the strategic tie-up between the two companies. Whilst in the short-term this may not represent a significant direct financial threat to Vodafone, it will surely damage its image.
As Glazer makes more and more unpopular changes to the way United is run and continues to put up prices to service the debt, this disaffection amongst the loyal United customer base is sure to grow. Vodafone’s annual report states that: “We seek feedback on customer satisfaction and brand preference. Customer retention is a critical driver of market and financial success. Sponsorship allows for benefits to be realised at the local level.” All this could be put in jeopardy by Vodafone’s continued association with Malcolm Glazer.
“It's potentially disastrous for United,” one sponsor's executive told the Sunday Times in May. “Our involvement with United is predicated on the team's success on the pitch, but the disruption that this takeover is going to cause will make it very difficult for the team in the foreseeable future. And any boycott of our products by fans would entirely defeat the logic of our partnership in the club.”
MUplc Chairman Sir Roy Gardner stated, when resigning shortly after the hostile takeover, that: “When a football club is under financial pressure, some of the key assets which it can sell are its players and, at a time of poor performance, such sales are likely to make playing performance worse. Too much leverage could therefore drive a downward spiral in both team and financial performance.”
Sponsorship is supposed to enhance a brand, not endanger it. Vodafone has some well-chosen sponsorship deals throughout the world of sport, but the tie-up with Malcolm Glazer is bound to reflect negatively on the company. All of Vodafone’s shareholders and commercial partners should be very concerned with this ticking-time-bomb and should urge the board to sever ties with Glazer as soon as possible or risk being associated with an increasingly tainted brand and the most disastrous and high-profile financial collapse football has ever seen.
MALCOLM GLAZER’S HOSTILE TAKEOVER OF MANCHESTER UNITED. WHAT THEY SAID:
Vodafone chief exec Arun Sarin (May 2005): “We are conscious of it [the Glazer takeover]. Obviously when we close a sponsorship we are mindful of their [the company’s] brand and our association with the brand. We have had conversations. We will have to wait and see.”
Tim Crow, a director at Karen Earl, the sports sponsorship company (May 2005): “There are usually all sorts of exit provisions. Vodafone’s deal was all about turning fans into customers and if something happens to change that then it would need to sit down and at the very least would need to be renegotiating its terms.”
MU Board (25 October 2004): “The Board would regard an offer which it believes to be overly leveraged as not being in the best interests of the Company.”
MU chief exec David Gill (October 2004): “The level of debt required is not in the best interests of the Club. The Club has 126 years of history and is recognised as one of the most successful football clubs in the world. I don’t think any sensible person would think we could recommend a proposal that could jeopardise something that has been built up over so many years. We have very vocal fans and one of the key strengths of Manchester United are those fan groups.”
MU Board (11 February 2005): “The Board believes that the nature and return requirement of this capital structure will put pressure on the business of MU, particularly if Glazer’s business plan was not met. The Board continues to believe that that Glazer’s business plan assumptions are aggressive and that the direct and indirect financial strain on the business could be damaging.”
MU Board (28 April 2005): “The Board remains of the view that the assumptions in Glazer’s business plan are aggressive. The Board’s unanimous view is that they could not support Glazer’s [takeover] proposal…….as being in the best interests of the Company.”
MU chairman Sir Roy Gardner (May 2005): “During its discussions with [Glazer], the board sought a range of legally-binding protections for the football club, its fans and any minority shareholders, including in relation to future levels of net debt, new player investment and transfers, team selection, Old Trafford [and] ticket prices. No such protections or assurances have been forthcoming.”
Greg Dyke, former United director (May 2005): “Most of us who have looked at it think he can't conceivably fund that bid. He's clearly bought this on borrowed money and I don't think a club like Manchester United could sustain that. Two years out of the Champions League and the cash flow dries up. My guess is that in five years' time the Glazer family won't own Manchester United.”
Bill Poe, former Mayor of Tampa (October 2004): “The British government and its citizens have been great allies and friends of America. I would question whether I would want someone like Glazer representing American business in Britain. He’s taken every advantage that he could have taken from Tampa and put very little back in.”
Glazer's sister (November 2004): "People in Britain should be very wary of him. I don't think he is fit to own such a famous and historic club as Manchester United. If he gets his hands on it the only one who will benefit is Malcolm.”
Virgin Mobile (May 2005): "We’d be more than happy to welcome any ex-Vodafone Manchester United fans."
VODAFONE: HANG UP ON MALCOLM GLAZER
Vodafone’s sponsorship of Manchester United was once a near-perfect partnership, with both companies sharing strong brands and successful financial performance. However, since the hostile takeover of Manchester United by Malcolm Glazer in May/June 2005, Vodafone now runs the serious risk of being closely associated with a severely tainted brand.
Glazer has turned the most successful and profitable football club into the most debt-laden by buying United with vast amounts of borrowed money and transferring those potentially crippling debts onto the club’s books. In order just to service the interest on these enormous loans, Glazer’s United will have to raise income drastically in a very short space of time. Most financial analysts and industry experts insist that this simply cannot be done and that within three years United could face financial meltdown. It would be the most disastrous and high-profile collapse sport has ever seen.
Vodafone’s public image in being associated with such a collapse would undoubtedly suffer. What’s more, with so many United fans unhappy with Glazer’s takeover, it is likely that many will either cancel their Vodafone contracts or be reluctant to buy Vodafone’s MU Mobile products and services, a key aspect of the strategic tie-up between the two companies. Whilst in the short-term this may not represent a significant direct financial threat to Vodafone, it will surely damage its image.
As Glazer makes more and more unpopular changes to the way United is run and continues to put up prices to service the debt, this disaffection amongst the loyal United customer base is sure to grow. Vodafone’s annual report states that: “We seek feedback on customer satisfaction and brand preference. Customer retention is a critical driver of market and financial success. Sponsorship allows for benefits to be realised at the local level.” All this could be put in jeopardy by Vodafone’s continued association with Malcolm Glazer.
“It's potentially disastrous for United,” one sponsor's executive told the Sunday Times in May. “Our involvement with United is predicated on the team's success on the pitch, but the disruption that this takeover is going to cause will make it very difficult for the team in the foreseeable future. And any boycott of our products by fans would entirely defeat the logic of our partnership in the club.”
MUplc Chairman Sir Roy Gardner stated, when resigning shortly after the hostile takeover, that: “When a football club is under financial pressure, some of the key assets which it can sell are its players and, at a time of poor performance, such sales are likely to make playing performance worse. Too much leverage could therefore drive a downward spiral in both team and financial performance.”
Sponsorship is supposed to enhance a brand, not endanger it. Vodafone has some well-chosen sponsorship deals throughout the world of sport, but the tie-up with Malcolm Glazer is bound to reflect negatively on the company. All of Vodafone’s shareholders and commercial partners should be very concerned with this ticking-time-bomb and should urge the board to sever ties with Glazer as soon as possible or risk being associated with an increasingly tainted brand and the most disastrous and high-profile financial collapse football has ever seen.
MALCOLM GLAZER’S HOSTILE TAKEOVER OF MANCHESTER UNITED. WHAT THEY SAID:
Vodafone chief exec Arun Sarin (May 2005): “We are conscious of it [the Glazer takeover]. Obviously when we close a sponsorship we are mindful of their [the company’s] brand and our association with the brand. We have had conversations. We will have to wait and see.”
Tim Crow, a director at Karen Earl, the sports sponsorship company (May 2005): “There are usually all sorts of exit provisions. Vodafone’s deal was all about turning fans into customers and if something happens to change that then it would need to sit down and at the very least would need to be renegotiating its terms.”
MU Board (25 October 2004): “The Board would regard an offer which it believes to be overly leveraged as not being in the best interests of the Company.”
MU chief exec David Gill (October 2004): “The level of debt required is not in the best interests of the Club. The Club has 126 years of history and is recognised as one of the most successful football clubs in the world. I don’t think any sensible person would think we could recommend a proposal that could jeopardise something that has been built up over so many years. We have very vocal fans and one of the key strengths of Manchester United are those fan groups.”
MU Board (11 February 2005): “The Board believes that the nature and return requirement of this capital structure will put pressure on the business of MU, particularly if Glazer’s business plan was not met. The Board continues to believe that that Glazer’s business plan assumptions are aggressive and that the direct and indirect financial strain on the business could be damaging.”
MU Board (28 April 2005): “The Board remains of the view that the assumptions in Glazer’s business plan are aggressive. The Board’s unanimous view is that they could not support Glazer’s [takeover] proposal…….as being in the best interests of the Company.”
MU chairman Sir Roy Gardner (May 2005): “During its discussions with [Glazer], the board sought a range of legally-binding protections for the football club, its fans and any minority shareholders, including in relation to future levels of net debt, new player investment and transfers, team selection, Old Trafford [and] ticket prices. No such protections or assurances have been forthcoming.”
Greg Dyke, former United director (May 2005): “Most of us who have looked at it think he can't conceivably fund that bid. He's clearly bought this on borrowed money and I don't think a club like Manchester United could sustain that. Two years out of the Champions League and the cash flow dries up. My guess is that in five years' time the Glazer family won't own Manchester United.”
Bill Poe, former Mayor of Tampa (October 2004): “The British government and its citizens have been great allies and friends of America. I would question whether I would want someone like Glazer representing American business in Britain. He’s taken every advantage that he could have taken from Tampa and put very little back in.”
Glazer's sister (November 2004): "People in Britain should be very wary of him. I don't think he is fit to own such a famous and historic club as Manchester United. If he gets his hands on it the only one who will benefit is Malcolm.”
Virgin Mobile (May 2005): "We’d be more than happy to welcome any ex-Vodafone Manchester United fans."
VODAFONE: HANG UP ON MALCOLM GLAZER