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Debt to equity
Vodafone 1.7
Verizon 3.4
BT 3.3
AT&T 2.1
DYOR.
That has surprised many I bet, the short sellers as well perhaps?
Mulder - This is pretty interesting I would never have believed it especially BT ! Before I retired I was a telecoms infrastructure sales Director and we saw Vodafone as an eldorado customer along with BT also. Trouble was to do business with either hammered our margins !!
Mulder, thanks for that analysis.
Looking at historic OECD data, Asia pac countries leverage mobile revenues off low debt to high income ratios while the Americas have low income to high debt ratios. UK is in the middle and slightly better than EU. It makes sense that Asia pac markets are generally less developed and less competitive than western markets so investment in infrastructure is lower.
10 years or so ago, the UK had the highest mobile revenue to debt ratio in the OECD and gave some of it up in an accelerated reduction in mobile termination rates in which 3 was the 'new entrant' agitator, drawing a line under long run incremental costs across EU and a tipping point to data economics and data network architectures....
In the end to end process we saw EE restructuring and many other examples of multi lateral reciprocation such as VOD increasing network investments in Germany. All of this was due to Globalisation (WTO, GATTS rules etc) and European alignment of policy interests giving us in the UK the local flavour of competition between firms ie the number of licensed mobile operators and consumer choice....
So in the current round of trade agreements, if our policy makers are any good, they will be callibrating for the comparative debt leverage ratios and, fingers crossed, allowing the market to consolidate.
For example, if Sunak and Hunt have their fingers on the pulse, they wont be throwing the baby out with the bathwater, and they will encourage the VOD 3UK consolidation as a catalyst for the next stage of regulated telecoms in the UK, Europe and Globally (eg China opening up again and India in particular because of its size) as part of coordinated trade policy agreements.
Vodafone wont be thrown to the wolves imo. In fact, with Reid promoting the principles of access to mobile internet as a human right, probably (as who else cares?) underpin the principles of free trade/ trade agreements and probably a return to WTO/OECD regulation using debt ratios relative to GDP for all the countries that VOD operates in.
So I still like the word 'resilient' in the face of the negotiations ahead. The current SP is a once in a lifetime bargain imo
Knowing telecoms and both 3 and VOD I think this analysis is very valid. A merger of these 2 is a mutually brilliant idea. 3 struggles to scale and control its back office cost base, while VOD could use the extra market share and sector share.
Hi Mulder,
Yes, hadn’t compared to others so until you pointed it out, I didn’t realise VOD had the more manageable “NET” Debt ratio; so thanks for highlighting that fact.
However . . .
- must take issue with the wildly incorrect (IMO) BT ratio; so have to ask what data supplier are you using for your debt metrics?
Or is it I, that has it all incorrect?
Is it the Morning Star website you use or somesuch (as you include a couple of US stocks for comparison?)
I used another data supplier besides my expensive subscription package data supplier and both have nowhere near the poor result you lay at BT’s door.
In fact I see quite a difference to VOD’s that you show, but your overall assertion seems to hold that VOD is the best debtor ratio of a bad bunch of debtors, so to speak. : )
Didn’t bother with the US stocks after finding BT wildly inaccurate (so inaccurate I expect you’ll be hearing from Fleccy :)
Firstly, you have to compare like with like.
And Net debt to equity can only be reasonably accepted if the very latest trading results are used. I very much doubt they all have the same H1 dates although BT’s dates are pretty close to VOD’s.
Secondly, which debt metrics did you use because they all differ vastly.
1) Did you use Long Term Debt?
- or did you include Capital Lease Obligations which can massively increase the amount to give the -
2) TOTAL Long Term Debt?
- Or more confusingly the
3) Total Debt which is higher than any of the above? ( €70B for last full year! )
[One more post coming on the weekend on that amount).
When in my view, the more pertinent debt is –
4) The NET Debt?
I see VOD as 109.44% ie., 1.09
Which is a much better performance than your 1.7
BT which you show as a terrible 3.3 I have as 130.31% ie., 1.30
So yes, VOD is still the better net debt to equity participant– but both stocks are much higher than the generally accepted 50% debt leverage point, beyond which red flags are raised on both stocks.
So both draw criticisms but BT’s red line crosses is deemed the more guilty player.
The main take-away is that despite VOD’s large net debt it is still well covered by Operating Cash Flow.
Please don’t think I know more than this post suggests. I don’t.
(I have access to data subscription packages that give me a helping hand).
PS.
Like VOD, BT’s Operating Cashflow also easily covers debt repayments.
-------------
BUT I would still like to know how you arrive at such an horrendous Net Debt to equity ratio for BT, as it’s only a little worse than VOD’s ratio.
PPS, To the below post.
- Despite the good news of OPERATING Cashflow (not to be confused with FCF (Free Cashflow) being more than sufficient to meet debt repayments for both VOD AND BT - Both have terrible liquidity ratios. Terrible!
Now that does confuse the hell out of me! Tsk! How can that be?
Must be Schrodinger's Cat syndrome and all that :)
- F'king financial accountants and their above-the-line and below-the-line stuff
"Despite the good news of OPERATING Cashflow (not to be confused with FCF (Free Cashflow) being more than sufficient to meet debt repayments for both VOD AND BT - Both have terrible liquidity ratios. Terrible!
Now that does confuse the hell out of me! Tsk! How can that be?
Must be Schrodinger's Cat syndrome and all that :)"
Telecom companies are currently directing huge amounts of capex into FTTP and 5G. These are likely to be the last major Telecom infrastructure upgrades for generations. Once the current round of Capex is completed, the operating costs should be considerably lower, particularly in BT's case. I'm heavily invested in both BT and Vodafone, but I can see BT's path to growing the bottom line much more clearly, probably because BT is easier to understand, and I don't buy into the Altnet threat narrative. Although I'm confident in my Vodafone investment, I was unsure about Vodafone's takeover of Unitymedia, due to the network being Docsis based and likely requiring conversion to FTTP at some point in the future, as is the case with VMO2 in the UK .
"Knowing telecoms and both 3 and VOD I think this analysis is very valid. A merger of these 2 is a mutually brilliant idea. 3 struggles to scale and control its back office cost base, while VOD could use the extra market share and sector share."
I can see the advantages for Vodafone and 3 merging, but the regulatory hurdles for such a merger will be massive. 3 and Vodafone are both mobile providers, so both providing the same service in competition with each other. BT's takeover of EE and the VM merger with O2 were both tie ups between fixed line and mobile companies, so different from a Vodafone/3 merger. Unless it suits BT and VMO2 to narrow the field, I could see them taking legal action if a merger was waived through, and there's a good possibility others may take legal action even if the big two don't. Weighing up the probabilities, there's more chance a Vodafone/3 merger will be blocked, rather than allowed to happen.
One thing I forgot to say about 3 is that they are heavily in sectors that VOD dont bother with such as area mobile data for smartmeters, smart bus stops, wireless telemetry for all sorts of wierd remote apps, in-car wireless data etc etc. This is a growing market and 3 are possibly one of the leaders in the UK
Historically this is a crazy price for VOD - the share was trading at 136p when covid was announced and we had no vaccine and no prospect of a vaccine - that is around 30pct higher than the share price today, admittedly since then we have had Brexit and the war in Ukraine which has taken its toll on economic growth but one has to be realistic here - is it really worse for VOD than it was then? - I will continue to add if it goes sub 90p
gla dyor etc
"I will continue to add if it goes sub 90p"
Well done for achieving your 90p buy yesterday, I was dubious it would dip that far. I suspect the broker/dealers had a lot of 90p buy orders and helped the stock dip to meet the orders, so they could benefit from the dealing charges, but that's just my suspicious nature lol.
' I could see them taking legal action if a merger was waived through'
I think they take legal action as a matter of course and to get a remedy. All those high street zombie shop fronts need consolidating and rebranding now you can buy online. I cant remember the last time I went into a phone shop. When I think 3, I think 5...their job as a 'new entrant' disruptor is done and we now have the consumer mobile internet. Next phase could be eg making Hutch ports Smarter and need VOD UK. That would be a big account and attract FDI. Win Win for UK PLC imo
Mulder. Where do you get the B.T. debt to equity ratio of 3.3. from. The only figure I can find is 1.156 on the 30 sept 2022.
"One thing I forgot to say about 3 is that they are heavily in sectors that VOD dont bother with such as area mobile data for smartmeters, smart bus stops, wireless telemetry for all sorts of wierd remote apps, in-car wireless data etc etc."
I'm still of the opinion that 3 and VOD are facing massive regulatory hurdles to merging, but should it be allowed I wonder what will happen to 3's 50% share in MBNL? The joint Tower company shared with EE.
Vodafone transferred their 50% share of Cornerstone to Vantage Towers last year, and it's now reported that Liberty/Telefonica (VMO2) are weighing up selling the other 50% of Cornerstone, but who to?
If Vodafone merge with 3, the new company will own a 50% stake in MBNL with the current Vodafone Towers 50% owned by Vantage, which Vodafone will hold a 49% stake in.
I think you can see where I'm going with this. It'll be another headache for regulators to untangle the web of Tower ownership, as mergers change the mobile landscape. Potentially Vantage could have a monopoly on UK Towers, so regulators may look at mergers, or sales of Tower assets, going forward and force divestment of certain Tower assets should mergers be allowed, alternatively they may say this is too complicated and block mergers.
For context, in respect of the Tower businesses:
https://mbnl.co.uk/about-us/
https://www.vantagetowers.com/sites/tower-co-v2/files/media/cornerstone-announcement.pdf
https://www.mobileeurope.co.uk/telefonica-and-liberty-global-looking-offload-50-of-uk-towerco/
' It'll be another headache for regulators to untangle the web of Tower ownership'
It will come down to the strength of each CEOS regulatory strategy and their own corporate strategies. Its possible VOD could retain control of Vantage and share in MBNL under some form of 'equivalence' principle like when Openreach was carved out but consolidates into the BT Group. Long term I thought the idea of 1 urban mobile network operator and 1 rural mobile network operator in the UK was a good solution to drawn out regulatory disputes between so many operators and referring matters to competition advisory tribunals etc. In the end, some form of remedy from winners to losers
vodger, You say it will come down to the strength of each C.E.O.'s regulatory strategy. Why then don't some (L.S.E. chat forum) vodafone shareholders support there C.E.O. & his strategy? I think it is time to realise, Nick Read knows a lot more than all you, vod, armchair experts, on this forum, put together. Any idiot can moan, But if you are not an idiot, you realise it is far more complicated? (far beyond some of you lot)? Just get real & grow up.
mrcautious. You say you would have never believed it about B.T, ? Nor would I, because according to my info it is complete nonsense. Come on you lot, please at least check bull****, before you agree with it. An answer would be good! Please you lot , stop posting fake info? It doesn't help.
Goodness danieth you do seem to have some strong views, now some might be right and some might be wrong but like many others who also have the right to post their views which might not always agree with yours.
But to post on here that all / many others are talking well crap , you just make yourself look like a complete pratt. Just let others post what they like and you can read it or just don't.
Jed - daniel gets a bit grumpy but you get used to his lack of patience, hang on in here please this forum could do with an injection of new blood.
Here’s a sobering read fellow Voders …
https://www.thisismoney.co.uk/money/markets/article-11472007/BT-Vodafone-hit-rising-costs-debt.html
Gary59 - Thanks for the information
"Here’s a sobering read fellow Voders"
This article is just one of many presenting a negative narrative around Vodafone and BT. As I've pointed out previously, the current round of Capex isn't going to be forever; Once 5G and FTTP are completed, I don't see any massive infrastructure expenditure for decades.
Just to clarify a few points, 6G isn't a full infrastructure replacement for 5G, it's a complement to 5G and will utilise 5G frequencies, in most cases, to offer new 6G applications. 5G/6G, using EHF in the 30 to 300Ghz range, are severely affected by atmospherics and obstructions as the frequency increases, and will only be useful for very small distances with a clear line of sight, probably shopping centers, stadiums, possibly the high street with enough cell coverage.
LEO's like Starlink, are affected by same issues limiting 5G/6G transmission, as the Frequency rises up the SHF/EHF scale. LEO's will never be a replacement for terrestrial systems and will only be useful in providing service for rural, ship and Aircraft. LEO's won't replace everything else, as some of the hype implies.
The winners will be the providers who can provide the best FTTP, 5G and metro WiFi service coverage i.e., the ones with the largest scale.
By 2030, most of the infrastructure will be completed and Telecom company capex will drop massively. Since the market is supposed to be forward looking, I expect the narrative will change well before then.
Gary, yep energy costs are a problem. It could have been worse if VOD hadnt done something about it.
In H1 presentation they said this about Energy costs
• FY23 93% hedged (+€300m YoY)
• FY24 c.50% hedged at €207/MWh
• Further +€500m YoY @ spot prices
• Potential government intervention
• Renewable PPAs for structural price anchoring (>30% from FY25)
Wage inflation
• Low single digit payroll inflation in FY23, to further increase in FY24
Also, VOD is taking price action across European markets with CPI+ linked pricing
While VOD has flexible contracts & vulnerable customer protections in place, its really a bellweather for the problems to come across all buinesses not just VOD.
I still like the word 'Resilient' to describe performance.
I also like their statement 'Committed to min. 9c. dividend p.a.'
Hi Gary, we are living in difficult times for sure, one thing i don't think anyone has the answer to is has that already been priced in with the already very low sp, same with the house builders you have invested in, with house prices predicted to drop 10-20 % next year that would wipe out the house builders' profits, again has it already been priced if anyone knows the answers to this, please tell me
cheers
Robleo - If house prices fall then the builders shares will also fall. Guaranteed.