Vodafone hit by Nomura downgrade on competition concerns

Vodafone's recent share-price outperformance means that the stock is now pricing in a recovery in its markets, something that Nomura reckons will be "slow to take hold".The broker downgraded its rating for the telecoms giant on Thursday from 'neutral' to 'reduce' and reduced its target price from 190p to 180p.The comments pushed the stock down nearly 2% to 200.3p on Thursday afternoon.Nomura said despite Vodafone being priced for "market repair", competition "may well increase rather than decrease" over the next 12 months.Nomura said it expects new entrants in the market in the UK, Netherlands and India, whilst competition is increasing in South Africa and Turkey for the second straight quarter. Meanwhile, competition over high-speed data from Drillisch in Germany - its largest market - and Yoigo in Spain could also affect pricing.Pricing is also a concern in the business mobile sector with the market facing structural pressure. "European corporates are exploiting data as a means to reduce voice/messaging spend," the broker explained.Finally, Nomura highlighted fears that Vodafone's 'Project Spring' network investment plan may not deliver the step-change in customer experience that is hoped: "Recent surveys in the UK and Germany show Vodafone in a poor light and undermine its aspiration to demonstrate and monetise a sustainable premium positioning on quality. This in turn increases our concern for Vodafone's medium-term dividend."Vodafone's stock has outperformed the wider telecoms sector by 7% and the benchmark FTSE by 12% over the last three months. It now trades at 7.0 times estimated operating profits, compared with a multiple of 5.1 at the start of 2013.