What is the City for, exactly? A place for young men to get rich quick? A magnet for global bankers? A way of keeping London property prices among the most expensive in the world?
In fact, it is meant to be a vehicle for raising capital for companies. But in the last decade it has completely lost touch with that role. The numbers of new listings have shrivelled to almost nothing. Very few companies ever attempt a rights issue to raise fresh money. In short, the City no longer appears to have very much to do with expanding the productive base of the economy.
So Vodafone is about to set it a test. One of Britain's largest and most successful businesses, it now looks as if it needs a lot of fresh cash. Yet whether the City will be able to provide it is open to doubt. If it can't, it will finally have lost any serious purpose.
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This week, Vodafone hit the acquisition trail for the first time in years paying €7.7bn for the German cable company Kabel Deutschland. That is a far cry from its £112bn acquisition of Mannesmann in 2000. But it was still a big deal, and a necessary one. The telecoms sector is changing fast and Vodafone has realised that to survive it needs to get into fixed-line telephony, cable, and probably broadband and entertainment as well.
Mobiles, for example, are not just things we make calls on these days consumers want to pay a single bill to a company that plugs them into the world efficiently and cheaply, rather than deal with three or four different providers. Vodafone had already paid £1bn for Cable & Wireless Worldwide, which made it the second largest player in the British domestic market after BT. But it will need to make a lot more acquisitions if it is going to compete as a market leader. It might want to buy Sky TV, plus telecoms and TV companies in Germany, Spain and Italy. None of them will come cheap.
Nonetheless, there is no reason to think it can't make a success of it. Vodafone is the world's second-biggest mobile operator after China Mobile, with 446 million subscribers. Mobile is still what consumers care most about, and Vodafone has an incredibly powerful customerbase. With the right acquisitions, it should be able to build a successful mobile/broadband/entertainment business.
Last time around, the City backed Vodafone all the way and created a new national champion for Britain. It paid one fortune to acquire licences for mobile networks around the world, and another to acquire existing players in America, Germany, and across much of Europe, the Middle East, Africa and Asia. Not all of the deals were a good idea it never really managed to make its Japanese arm work, for example. But it was encouraged to spend big and given the money to do so.
This time things look different. The chatter in the City is all about Vodafone selling assets rather than buying them. It is under constant pressure to dump its 50% stake in the American operator Verizon Wireless, its most valuable possession. It is only the massive tax bill it would face if it did so that has allowed it to resist this pressure. In truth, Vodafone can go in two ways now. It can either be sold off and broken up, or the City can mobilise enough capital for it to reinvent itself.
But while there are undoubtedly arguments to support both courses, what is striking is how little ambition there is left for the company. No one in the City is arguing forcefully that it needs to get out there and buy broadband or entertainment assets. Shareholders are not pressuring it to turn predator and buy out Verizon rather than be bought out, and they are not telling it to snap up an ailing Sony to add content to push through its network and volunteering the cash to make it happen. The talk is all about how to squeeze the most out of what it has.
And yet this is hardly some ailing conglomerate in a declining industry. Vodafone is the most remarkable British industrial success of the last three decades. The business was only launched in 1985, but within 15 years it became the biggest global player in the world's fastest-growing industry. Nor is Vodafone in a declining sector. With the right backing, it could get a lot bigger still.
If the City isn't prepared to back Vodafone, then who will it support? Plenty of other companies might need reinventing in the next few years. BP may have to change radically to adjust to the shale gas revolution. Barclays might need to expand beyond branch banking, and become an internet bank. British Aerospace might need to get out of physical weapons and become a computer security company.
The task of the City has always been to raise the capital needed to make such transformations possible. Its critics have always attacked it as a casino table where assets are shuffled around, but rarely created. For most of its history that has not been fair. The City made a lot of money for itself, but it also created real wealth by financing investment.
However, increasingly it looks as the City's critics might be right and Vodafone could be the latest proof of that.
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