Julian Horn-Smith says better news is on the way, writes Jamie Smyth Technology Reporter.

Mr Julian Horn-Smith is no stranger to the Republic. The smooth-talking second-in-command at Vodafone - the world's biggest mobile phone company - married into Ireland through his Roscommon-born wife, Eileen, 30 years ago .

But he is probably best known on these shores as the man who negotiated Vodafone's controversial purchase of Eircell from Eircom in 2001. This deal, which he negotiated with the former Eircom chief executive Mr Alfie Kane, quickly led to the sale of the rump fixed line Eircom operation. Billed at the time as Irish shareholders best hope of gaining a return from their Eircom investment, instead it has only compounded their misery.

Vodafone shares, already falling before the deal was concluded, slumped to record lows shortly after the ink on the contract was dry. This has led many commentators to ask did Eircom sell off its crown jewel - its fast growing mobile arm Eircell - on the cheap?

"Looking back on it now if you think about things that have happened in our business, not just Vodafone's business but the whole sector, the transaction that occurred at that time makes perfect sense," says Mr Horn-Smith. "This wasn't a Vodafone, Eircell or Eircom issue. This was a global issue."

In fact, the prognosis for Eircom shareholders would have been a lot worse if Eircell had not been purchased by Vodafone, says Mr Horn, who highlights the rapidly changing nature of the mobile industry as a significant barrier for small, lone operators with few economies of scale.

"You can imagine the practicalities of trying to launch a service like Vodafone Live in a country and network with just a few million people. Trying to find the research and development and the information technology investment to be able to do that on your own is very difficult or well-nigh impossible."

The 450,000 shareholders of Vodafone living in this State who have seen their shares fall from £2.20 at the time of the deal to just £1.40 may not agree. But Mr Horn-Smith quickly points out that its share are recovering.

"We went to a low of about 80 pence and we are now trading in the £1.40s. We've had a good run in the last year... [former Eircom shareholders\] would hopefully be less disappointed than you would have been this time last year."

Better news could also be just around the corner following changes in Vodafone's strategy, according to Mr Horn-Smith.

"We have determined that we will have a buy-back programme and we will have an increase in dividend rate. We are determined to give the benefits of that financially successful performance to our shareholders."

Dividend checks from Vodafone will be landing on shareholder doorsteps in the Republic sometime next week. And they will be in euros, says Mr Horn-Smith, who ruefully admits it made an error by posting sterling dividend checks in the past.

Being sensitive to local markets and Vodafone's 1.8 million Irish customers is a huge challenge for the company.

Vodafone is currently Europe's biggest company by market capitalisation with some 130 million customers. Since it was founded in 1982 as Racal Telecom in Britain, Vodafone has grown rapidly, fast becoming one of the world's biggest brands by scooping sponsorship deals with the likes of Manchester United and Ferrari. Its interim results show Vodafone is generating turnover worth £17 billion every six months.

Its debt mountain of £11 billion is admittedly big, but nowhere close to the debts built up by many of the big European telecoms firms, such as Deutsche Telekom and France Telecom.

Vodafone's ability to issue shares rather than use cash to undertake a spate of expensive acquisitions in the 1990s proved perceptive when the dotcom bubble collapsed and a massive cash crunch hit telecoms firms.

Shareholders will hope that the era of deal-making under former chief executive, Sir Chris Gent, is over and the more prudent "higher dividends and share buy-back" strategy outlined by Vodafone's new chief executive, Mr Aurin Sarin, will set the tone for the next few years. But with a $25 billion auction for US wireless operator AT&T looming, rumours already abound that Vodafone will seek to swap its 45 per cent stake in Verizon for full control of AT&T. It is no secret that Vodafone prefers 100 per cent control of its mobile operations, particularly those in important markets such as the US.

Unsurprisingly, the 55 year-old telecoms veteran, Mr Horn-Smith, remains coy about the firm's intentions.

"We follow what goes on in the US, we have to", he says. "We could only look at other things [apart from Verizon\] with a) their permission and b) if there was something better for our shareholders."

But Vodafone's expansion into other areas is likely to continue. The firm has operations in 28 countries already and is continuing to seek franchise operations similar to those in Tanzania and the Congo.

"The Vodafone today is nothing like the Vodafone of 20 years ago," says Mr Horn-Smith, who joined Vodafone when it was just a 40-man company in 1984. "Vodafone has grown from a David into a Goliath today."

"I think the challenges today are actually providing the benefits of global scale, with products and services which are common across Europe and elsewhere in the world...\ trying to obtain the benefits of scale in negotiation with suppliers, for handsets or infrastructure."

Mr Horn-Smith cites the Vodafone Live product as a major success achieved on a global scale. The multimedia product enables users of camera phones to use a suite of services that includes multimedia messaging, games and ringtone downloads.

"People are coming to our stores and they no longer are asking us for Nokia but they are asking for a Vodafone Live phone, because that is a Vodafone branded service."

Currently almost 10 per cent of Irish users - 180,000 subscribers - have signed up for the service. Irish people tend to be early adopters of data services. More than 20 per cent of the firm's Irish revenues are generated from data services rather than voice services - a performance only matched by Vodafone's Japanese subsidiary.

But new figures published this week continue to show that Irish people are spending more on mobile services than Vodafone customers in any other European Union state. The Commission for Communications Regulation used this measurement this week to back up its plan to force Vodafone and O2 to open their networks to competitors. In a landmark decision ComReg ruled that the mobile market was not yet competitive and expressed concern about prices charged by the two dominant firms.

"They \ are wrong. I haven't the foggiest idea where they get their numbers from," says Mr Horn-Smith, banging his fist on the table in apparent frustration. "It is my job to analyse prices...This is what we charge relative to France the UK, New Zealand, Egypt, the Netherlands. Across the whole range of tariffs Ireland is in the middle of the pack. It is not the most expensive, its not the cheapest. I dare say if we drew an average, it would be about average."

Vodafone's own internal figures show its Irish charges are on average 10 pence sterling per minute and on average Irish customers make just over 100 minutes of outgoing calls per month. And Mr Horn-Smith says Vodafone isn't going to back down.

Any decision to enforce regulation on the firm will result in an appeal to the European Commission.

"Absolutely, because once you establish an infrastructure that starts making those types of decisions. Then a year later another agenda item and another one and they \ can't stop the process."

He doesn't pull any punches on ComReg's past performance either. "Look at the mess that happened to the fixed wireline business as a result of over-ambitious, over-enthusiastic regulation. It has been a mistake... and it has been destructive."

Clearly the gloves are off. ComReg will have to take on the might of Vodafone - Europe's biggest firm - to enforce its decision. Mr Horn-Smith, the 20-year mobile veteran, may be spending more time than he bargained for in Ireland this year.

FACTFILE

Name: Julian Horn-Smith

Age: 55

Family: Married to Eileen, whose parents were born in Roscommon. He has four sons who are all in their 20s.

Background: He worked at the Dutch electronics company Philips and confectionery giant Mars before joining Vodafone. He is chief operating officer of Vodafone Group, the world's biggest mobile phone company.

Interests: He owns a two-year-old racehorse and enjoys going to the races with friends.

Why he is in the news: He is strongly critical of ComReg's decision to force the firm to open its network to rivals. He is also bullish about third generation (3G) mobile technology.