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compound
a reasoned opinion and good comment
IoT - " Customers tell us that no-one is doing more in this area, whether it’s redefining quality of service, pioneering the use of SIM as a Platform, driving the use of video analytics and visual IoT, looking at 5G for IoT, or coming up with fresh commercial models for IoT customers."
https://www.vodafone.com/business/news-and-insights/analyst-views/vodafone-named-a-leader-in-2022-gartner-magic-quadrant-for-managed-iot-connectivity-services
Funny how it manages to bounce back quickly after being batted down. Some manipulation obviously going on.
Hopefully will get a little rise leading up to ex-Div date.
Mesh - you are of course correct that in an inflationary environment you can expect gross revenue to increase, but business asset prices aren't usually valued on gross revenue, but rather on net revenue. VOD are already increasing prices to existing customers of CPI+3.9%, but in their own forecasts, this increase in gross revenue will eaten up by increasing costs, as their forecast EBITDAaL is flat. That figure also doesn't take into account the increasing debt repayment costs, so net revenue from assets is set to decline in nominal terms, which isn't great at the best of times, but is even worse in an inflationary environment.
VOD aren't going out of business any time soon, but I'd question how much of a possible upside there is in the current inflationary environment when forecasts for profit and dividends are flat, and FCF is down a bit.
They've got to work hard to increase gross revenues just to maintain current profitability and dividends, never mind growth in either. When you strip out any potential for growth, all you are left with is a dividend which at current prices is around a 6.30% yield. That's not too shabby, as current UK corporate bond yields are around 3.28%, so investors are getting around a 3% risk premium which is about right. VOD may be around fair value at the moment, but if bond yields rise further, the SP will need to drop to maintain the same risk premium. Bond yields have increased by around 1.4% since December, and if they rise another 1.4% over the next 6 months, then the VOD SP would need to drop to 98p to maintain the current risk premium.
As for the long term mega profits for VOD with IOT that Fleccy and others think are bound to happen - I'm still not convinced based on their current product offerings. IOT will become an integral part of our lives, as will the connectivity to run it, but we'll probably just take that connectivity for granted and end up paying the same or less for it. We already pay less now for 5G than we did for 3G 10-15 years ago, despite the massive infrastructure spend to deliver it. The big winners will be true tech companies offering new products/subscriptions. The bulk of VOD revenue is still from mobile/broadband packages and that doesn’t look it’s going to change considerably. Even when the spending is 'completed', Telecoms companies won’t be raking in profits if the sector continues with it’s perennial race to the bottom on pricing. If that trend continues, cost savings will just lead to lower prices rather than massive profits.
The results were ok but not great. Price is currently around the half way point between the highs and lows of the last couple of years. If it hits the lows again in the next few weeks/months I’d probably buy a chunk as I can see this being range bound between around 100-140 for the foreseeable future.
Blip over hopefully - lets hope it keeps rising from here
I better post that again, with corrections lol.
A Goldman Sach analyst just did an interview on CNBC. He was super bullish on Telecoms, and said that valuations are now at an inflexion point and to expect big growth in profits and improving sentiment going forward.
VOD generally tracks 'global' GDP and growth is slowing. Consumers are cutting back on media spend and subscriptions.
UK network overhead and 3UK network overhead have duplicated debt which must squeeze the cost cost somewhere else, but not vantage or germany! Africa is more about light touch partnerships and branded access, and presumably what etisalat want (or influence) ie the vodafone brand.
the current argument for regulation and competition is being called out as a race to the bottom. Read wont survive that imo
A Goldman Sach analyst just did an interview on CNBC. He was super bullish on Telecoms, and said that valuations ae now at an inflexion oint and to expect big growth in profits and dentiment going forward.
if....high interest rates are coming and debt will be more expensive ....why would anyone want to pay top Dollar for Spain and/or Italy assets with higher debt costs and added economic uncertainty ? ...
They didn't sell Italy or Spain because they aren't being offered a good enough price for them ...risk related
Sold half their holding, probably off-market to Etisalat.
Thankfully yes VOD does have a near global presence and it’s African assets are now delivering the sort of growth rates it used to enjoy in Europe and the US before its sale of the Verizon stake by Collao. However, Europe is now a highly competitive and regulated mature market so increasing prices might be thwarted by governments, now we have a cost of living crisis, and mergers might still be blocked on competition grounds, particularly by the EU although hopefully the UK government will let a merger with ‘3G’ proceed. Like you I would like to see VOD dispose of its Spanish and Italian businesses but suspect they won’t get a great price for these due their mature status and low potential for growth? (We’ve already seen an approach for Vantage Towers which has a much higher potential for growth from the capital investment community and I wouldn’t be surprised to see Etisalat-e& for for VOD’s high growth African assets once they’ve ‘got their feet under the table. After all, Vodacom is in Etisalat’s ‘backyard’ and they’ve got the UAE government funding them.)
"The dividend is a joke ... they give it to you in one hand and take capital value from the other as the debts rise to pay for it."
The dividend is an anomaly, when you consider it's 9 Eurocents with Basic EPS of 7.20 eurocents, but I trust they know what they're doing. I suspect earnings are expected to rise significantly in the coming years, with the dividend rmaining at the current level. If you trust that earnings will increase, and you don't need the cash, it would make sense to reinvest future dividends back into the stock.
Hard to believe that years ago Vodafone bestrode the London market with a valuation of over £200 billion. Since then it has been a steady story of value destruction. I have hung on the line for a long time now but I do wonder whether someone should put the company out of its misery and just break it up.
comsman, I tend to disagree simply because of VODs unique global coverage and diverse business model relative to other telcos.
Also, with increasing prices, debt will reduce accordingly. Should really have they dispose of Italy and Spain at any time and get 20billion+ for it. You need to look at the business as whole and not staring blindly at the liabilities. There is an asset side to the balance sheet;-)
With your viewpoint 90%+ of all mortgage holders are doomed as they are employees and they can lose their jobs at anytime. Yet, Vod is a lot safer than that analogy given their utility status.
Another fair point but you also need to consider the significant rise in interest rates that are coming down the line and as existing debts and bonds mature, VOD will incur much higher interest rates which will at least offset the benefits to debt from inflation. As I said previously VOD’s biggest problem is it’s debt.
Vodafone seems to exist for the benefit of banks and bondholders who are at the higher end of the food chain, whilst shareholders are more at the bottom end ...
The banks etc lend to Vodafone because they have big cash flows and can handle the interest costs and they just re-finance the debt over and over again
They had a problem where the ROCE was less than the interest payment returns which was disastrous...but Read has improved that over the last 18 months ....he needed to achieve that
but...they still pay debt costs on infrastructure than no longer exists as it has been phased out and as such they rely on all the new investment to pay for the cost of the redundant stuff...that has accumulated debt still on it
The dividend is a joke ... they give it to you in one hand and take capital value from the other as the debts rise to pay for it...
The new investor is an interesting move and maybe the success here can come from a reduction of CAPEX now that 5G is almost in place and IoT investment is putting the next phase ready for revenues there ..plus breaking up the group and getting value from Africa and selling non-core areas
"The whole concern is that VOD can't actually afford the decent dividend. It has borrowed to pay it since day 1, hence the enormous accumulated losses."
Since they're paying the dividend suggests they can afford to pay it. If they couldn't afford the dividend, i'm pretty sure Read would drop it since he is a Fellow Chartered Management Accountant and a Chartered Global Management Accountant, with a BA (Hons) in Accounting and Finance.
That’s a fair point but one of the first significant things Read did was to cut the divi’ by 40% to make it more sustainable and help fund 5G investment. As the former head of finance at VOD he should be well placed to determine what a sustainable divi’ is. Obviously, should he declare a further cut it’s curtains for him.
Baffling how people disregard hyper inflationary's impact on debt. I was expecting that least the average user here understood that in an inflationary environment, those who borrow to acquire assets at a fixed rate are the winners - cash is trash.
Based on the current market environment, you can bet your house that VODs revenues will be increasing in line and above the inflation rate of ca 8% whenever they reprice contacts etc. So rather naive to imply that debt levels are hurting the business, which it clearly isn't. Its the business model of the telcos. Heavy capex is part of the game.
The whole concern is that VOD can't actually afford the decent dividend. It has borrowed to pay it since day 1, hence the enormous accumulated losses. Divs are posted to the accumulated losses account in changes in equity.
The biggest ongoing impediment to a revival in the SP is VOD’s enormous debt but people should remember that Nick Read ‘inherited’ this from his predecessor Vittorio Collao and has managed to reduce it significantly in the past three years. Another inherited problem for Read has been India where the punitive actions of the Government there resulted in a major write down. Read is doing a decent job imho although I appreciate the angst of investors who are chasing an SP increase as opposed to just being happy with a decent divi’.
thank you fleccy ..gl & atb
thank you fleccy...atb.
"fleccy ive got ex div 16th june....pay date 29th of july.......dont understand your dates"
My dates were pasted straight out of the Chief Executive Statement.
https://investors.vodafone.com/sites/vodafone-ir/files/2022-05/FY22-Press-release-Final.pdf
"Total dividends per share are 9.0 eurocents (FY21: 9.0 eurocents), including a final dividend per share of 4.5 eurocents. The ex-dividend date for the final dividend is 1 June 2022 for ordinary shareholders, the record date is 6 June 2022 and the dividend is payable on 5 August 2022"
fleccy what divi dates you got ive got 16th june x div pay date 29th july ...couldnt understand your post on other thread tia
I was going to reinvest my Lloyds dividend back into Lloyds, but I'm now thinking VOD might be a better choice, especially since I'll get some discount on the purchase price from the upcoming dividend.