Emerging markets challenge new Vodafone CEO

By Kate Holton and Niclas Mika - Analysis

LONDON/AMSTERDAM (Reuters) - After grappling for two years with mature European markets, Vodafone's (VOD.L) new boss will have to turn his sights on booming emerging economies where customers could cut spending as food prices rise.

Analysts welcomed Tuesday's announcement that Arun Sarin, the chief executive of the world's largest mobile phone group by revenue, is to be replaced by his deputy Vittorio Colao.

Sarin's departure will not mark a major strategic shift for Vodafone, which like other telecoms groups is also trying to find its place in an uncertain digital future, experimenting with mobile advertising and fixed and wireless broadband.

Colao, 46, currently heads Vodafone's European businesses that are under pressure from regulator-imposed cuts in roaming and interconnection rates, making a tight grip on costs a priority.

Add to that macro-economic woes.

"In a place like Egypt, you are seeing basic foodstuffs going up by more than 20 percent," said Paul Donovan, who leads Vodafone's business in Eastern Europe, the Middle East, Africa and Asia.

"We are not seeing an impact yet on the business, but if this continues, given the very large amount of people's disposable income spent on food, that has the potential to take the edge off some of the expenditure that we're seeing."

Collins Stewart analyst Mark James struck a cautiously optimistic note on emerging markets.