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Vodafone to halve dividend payments amid scramble to upgrade network.
Company prepares for wave of investment as it pursues merger with Three.
Vodafone is to halve its dividend as the telecoms giant prepares to invest heavily in its mobile networks.
The FTSE 100 company announced a payout of 9 cents per share for 2024 but said it would slash this to 4.5 cents per share from next year “with an ambition to grow it over time”.
The company said: “The new dividend has been set at a sustainable level, which ensures appropriate cash flow cover and sufficient flexibility to invest in the business for growth.”
It came as Vodafone reported a return to revenue growth across the business in the fourth quarter as boss Margherita Della Valle’s turnaround plan starts to pay off.
The company posted a 6.3pc increase in service revenue – the amount of money made from its telecoms business – to €29.9bn (£25.7bn)………….
As the Vodafone situation is different than BT, I would hate to see this prompting a flavour for dividend setting in the sector, under the umbrella of reducing debt and using the money for investment.
DYOR.
Given gilts/bonds + bank interest rates are set to fall later this year and into next I think most of the big investors (e.g. pension funds/investment funds) won't seek to move their money even if the BT divi was to reduce a little down the line... because if you take a pension fund for example, which seeks out the best returns, and diversity for stability, for it's invested pension holders they'd be unlikely to find a much better ROI elsewhere. A divi trim could be net +ve for the SP, if the reason for current low SP is due to perceptions about careful management of debt levels.
Paying potentially unaffordable dividends and failing to invest sufficiently for the future, in order to compete , is at the end of the day, a deluded path to look down
If indeed they were to trim the dividend and invest further in tech, like VOD are doing with Microsoft partnership, then that in itself can help secure and push for stronger earnings , which generally supports stronger share prices
BT has far less shares in issue than Vodafone and a much lower dividend bill. Because there a less than 10 Billion shares issued in BT they don't need to divert funds into Buybacks, if they did it would also inflate Drahi's ownership of the company and potentially give him more control. I don't think BT need to reduce the dividend, even though UBS use dividend cut speculation in their updates to damage sentiment.
£12 billion+ invested in full fibre is hardly failing to invest
Pokerchips - I should clarify, I don't think that BT are paying an unaffordable divi... inflation linked price hikes help ensure revenues are keeping up i.e. holding the divi is akin to cutting it anyway. There's not a need to trim.
" inflation linked price hikes help ensure revenues are keeping up i.e. holding the divi is akin to cutting it anyway. There's not a need to trim."
As an investor the easiest way to counteract the inflation effect is to reinvest the dividends and grow your holding with each reinvestment, feeding through to more future dividends.
The yield on BT is very high (due to the meteroric fall in share price), it is currently not far short of the highest div in the FT100. The FT100 is circa 3.5%, BT is more than double that.
Given its huge and growing debt pile, they are 'effectively' funding the dividend with debt. It would therefore seem to make sense to reduce it to typical FTSE yields of 3.5%.
VOD cut its yield today and plans to cut it further next year, didn't seem to hurt the share price.
No they didn't
FY24 final dividend was at an annualised rate of 9 cents so no change. Next dividends (the interim in Nov and final) will be cut to an annualised 4.5 cents. But your statement was incorrect as its only 1 cut.
Div % is only high because the share price is so low. Look at div cover, bt is at 1.7, Vodafone was at 0.8. if the share price was back around £1.50 then div drops to 5% ISH. Your assumption is the share price will stay here or drop lower.
Sp is likely to recover to £2
FYI, I bought in about two weeks ago, this weekend I found out something that has changed my mind,. So I have sold half of my holding into the recent rise.
Still holding a few in case figures lift the price further, will likely then sell the rest.
In short I do not want to be holding if they lose that case, and I think they will. The potential liability being in excess of 1 billion.
If you want to know the details of what I found just look at my posts over the weekend, when I went from being positive about case to negative.
i read your weekend posts and nothing has changed your mind. you flip flop every comment you make. even today which is after you supposedly found something out.
what i’m politely saying is you talk a load of ****** .. filtered
Flip flopped, please do show me where I flip flopped.
I changed my mind on Saturday, sold shares yesterday and mentioned it, sold more today. I have now sold half of my holding. Will likely sell the rest on Thursday.
May as well take a chance on the figures. Unlikely that case will be decided in the next few days.
Will certainly buy back after case is decided.
"this weekend I found out something that has changed my mind"
So your privy to inside information? :)))))))
Or just full of it..... which is probably more likely.
No, I decided to spend a quiet Saturday morning trying to find out more about the case.
Simply put, BT said one thing in the Annual R&A, and OFCOM said something else.
IMHO, BT was less than candid.
The R&A comment of note.....
"Ofcom’s final statement made no finding of excessive pricing or breach of competition law more generally. The claim seeks to hold against us the fact that we implemented a voluntary commitment to reduce prices for customers that have a BT landline only and not to increase those prices beyond inflation (CPI)."
The OFCOM comment of note.....
"In our February consultation, we proposed regulated price reductions and a requirement for BT to
work with us to encourage their customers to consider what better deals were available.
We have now received an offer from BT that matches our proposed regulation for voice-only
consumers. Here we set out our consideration of BT’s offer."
Whilst they BT stated one thing, clearly OFCOM stated quite another.
You make your own mind up, but I can now see why that a panel thought BT did have something to answer for.
Hence my view has changed.
Read it for yourself.....
https://www.ofcom.org.uk/__data/assets/pdf_file/0015/107322/standalone-landline-statement.pdf
IDMB, OFCOM's reasoning was that elderly customers aren't engaged and are therefore staying with their provider no matter how much the price rises. Importantly OFCOM's opinion is that Split Purchase Customers are engaged and aren't being treated unfairly.
"2.2.1 The price reduction will not apply to BT Basic or Home Phone Saver customers.
2.2.2 The price reduction will not apply to Split Purchase Customers. BT will exclude any
standalone voice customers from the price reduction that it has reason to believe
buy fixed broadband services, whether from a BT group company or another
communications provider. Such customers will be provided with an opportunity to
opt back in if BT’s information is incorrect.
2.2.3 The price reduction will not apply to business customers. BT will exclude any
standalone voice customers from the price reduction that it has reason to believe
are business customers. Such customers will be provided with an opportunity to opt
back in if BT’s information is incorrect.
2.2.4 In respect of 2.2.2 and 2.2.3 above, BT will from time to time provide Ofcom with
information relating to the volume of customers impacted and the volume who have
received the discount."
Split purchase service is probably the largest part of the litigation claim, at least half or more. All CP's operate the same policy, if you don't renegotiate at the end of your contract your payments increase dramatically, in the case of landline's BT's competitors were following BT's price rises so competition wasn't working, that isn't BT's fault.
It's by no means clear cut that BT have overcharged and they're probably among the most regulated companies on the planet, so maybe the courts should leave it to the regulator in BT's case.
"Split purchase service is probably the largest part of the litigation claim, at least half or more. "
If so that would likely temper my view somewhat.
Source, please?
Look, I'm happy to be put right on this matter, as I still hold over 80,000 shares in BT (have already sold half into the rise), and think it a decent investment at the current price. It is simply that It could be an even better one after they deal with the case.
"The Proposed Class includes all persons domiciled in the United Kingdom (except in the Hull Area) who, during the Claim Period, bought a BT Standalone Fixed Voice Service (“BT SFV Service”), excluding BT Basic and BT Home Phone Saver (“Excluded Services”). A BT SVF Service means any residential landline calling plan service provided by BT, except for the Excluded Services, which (i) includes landline line rental and (ii) has not been sold as part of a bundle with broadband.
The Proposed Class is split into two Proposed Sub-classes, namely:
(a) BT Voice Only Customers: Members of the Proposed Class who, during the applicable Claim Period as defined below, bought a BT SFV Service but did not, at the same time, buy a broadband service, either from BT or any other provider.
(b) BT Split Purchase Customers: Members of the Proposed Class who, during the applicable Claim Period as defined below, have bought at the same time both (i) a BT SFV Service; and (ii) a broadband service, either from BT or any other provider.
The Claim Period means:
(a) for residential BT Voice Only Customers, between 1 October 2015 and 1 April 2018 inclusive;
(b) for business BT Voice Only Customers, between 1 October 2015 and the date of the Tribunal’s final determination of the claims made by the Proposed Sub-class of BT Voice Only Customers or their earlier settlement (or settlement of any part thereof); and
(c) for BT Split Purchase Customers, between 1 October 2015 and the date of the Tribunal’s final determination of the claims made by the Proposed Sub"
https://www.catribunal.org.uk/sites/cat/files/2021-01/1381_Patourel_summary_260121.pdf
"It is estimated that the size of the Proposed Class across the Claim Period is around 2.31 million individuals,
with the BT Voice Only sub-class estimated at around 1.23 million and the BT Split Purchase sub-class
estimated at around 1.08 million."
OK, So I understand that they have better prospects of a win on the split purchase part, given OFCOM somewhat let them off on that issue.
"Split purchase service is probably the largest part of the litigation claim, at least half or more. "
Well it appears to be the smaller part, but admittedly not by much.
Regardless, it is close to half of the claim.
Thanks...... ;-)
Something I missed......
"Aggregate damages have been given a preliminary estimate of £589 million (on the basis of 8% simple
interest, comprised of £238 million for BT Voice Only Customers and £351 million for BT Split Purchase
Customers)."
Clearly the figures have since increased (inflation), but it is clear that the larger amount of compensation is being claimed for those split purchase customers.
Which is very good news...... ;-)
"OK, So I understand that they have better prospects of a win on the split purchase part, given OFCOM somewhat let them off on that issue."
I take the complete opposite view, the whole point of OFCOM pushing BT into reducing prices was due to lack of engagement by elderly people, Split purchase and Business customers are both engaged according to OFCOM; Also the Split purchase and Business customer litigation period is much wider than the landline only residential customer. Patourel's lawyers aren't just asking the CAT to litigate, they're also asking then to regulate.
"Clearly the figures have since increased (inflation)"
No, the excuse for increasing the claim followed information provided by BT, in my opinion it was used as a lever to encourage BT to settle out of court, which BT hasn't done.