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Looks like the Dividend will be reviewed following any deal in Italy and if that’s the case we know what direction it will go in. See the last but one paragraph.
https://www.reuters.com/business/media-telecom/vodafone-be-minor-partner-any-italian-tie-up-with-swisscom-sources-say-2024-02-27/
Article identifies potential sale of Vod’s Italian operations to Fastweb, the smallest existing operator in Italy that is owned by Swisscom.
https://www.bnnbloomberg.ca/swisscom-s-fastweb-is-said-to-explore-deal-for-vodafone-italy-1.2002702
Barclays are reporting that it will take considerable time before the structural changes and disposals at Vodafone have a material affect on the company’s financial performance. Given that the Spanish sale won’t close until the second half of 2024, the UK CMA is not expected to even rule on the proposed merger with Three until the end of 2024 and as yet there is not even a proposal for offloading or merging the Italian operations, what Barclays report makes sense. Vodafone is a good buy, imho, but I’m not expecting any dramatic increase in the SP and believe it will be gradual over the next three financial years. Have been in this position previously with Cable and Wireless and have learned that patience is the key. BTW, Barclays are also suggesting a divi cut in FY2025 down to 6 Eurocents.
SSE just announced bumper profits and eps but then go on to say they are going to cut the dividend back to 60p in 2024.
Don’t expect a new CEO to deliver big SP gains anytime soon. Vod’s strategy to simplify its structure by selling or merging assets takes time unless you sell on the cheap, which to be fair to Nick Read he wasn’t prepared to do. He rejected the undervalued Iliad offer for the Italian assets and apparently has been hard nosed in his dealings with Three UK (Hutchison). On top of simplifying it’s structure comes the issue of debt and the only quick way to do that is to reduce the dividend. Nick Read did this shortly after becoming CEO so expect the new permanent CEO to do the same. Consequently, I don’t see the departure of Nick Read as good news for those, like me, who have primarily invested in avid for income.
Have been a long term customer of BT for broadband and mobile etc but when I did a mobile renewal today I was switched to a new dedicated EE account complete with a separate direct debit just for my mobile. What is BT’s strategy here? Once upon a time there was a big drive to offer ‘quad-play’ services to create ‘sticky’ customers. Is BT looking to engineer a future split of the fixed and mobile operations?
Seems Read and Co are looking to make a couple of ‘major’ announcements on November 15th. Firstly according to Bloomberg, KKR seem to be the favourites to take a minority stake in Vantage Towers which would deliver about $4 Billion in cash and help a bit to pay down Vod’s net debt, circa 67$ Billion. Secondly the merger with Three UK with Vod taking a majority 51% controlling stake in the new company, subject to UK regulatory approval. You would think ‘good news’ like this would see a decent SP increase but with Vodafone you can never tell. ??
Whilst both Vodafone and Three have millions of customers for their respective mobile networks only Vodafone has cable and fibre infrastructure, and very extensive it is too. This for me makes it difficult to understand the 51% to 49% proposed split of the combined UK operations. Should be more like 75% to 25% imho, perhaps Vodafone’s cable networks are not part of the combination but if so why are Vodafone promoting the potential to speed up broadband rollout as a benefit of such a merger???
Very good lol, we need a little humour on a morning like this. :)
FT reports this morning that Energy Windfall Tax coming to UK electricity generators.
https://www.ft.com/content/ddbde592-a4e0-465a-9dd2-d6566790403f
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.)
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.
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.
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’.
The UK telecommunications group Vodafone is reportedly in talks to combine its UK operations with domestic rival Three UK, the mobile operator owned by Hong Kong infrastructure conglomerate CK Hutchison, people with direct knowledge of the matter said.
The deal, if concluded, would herald the latest attempt to consolidate the British mobile market as Vodafone faces pressure from Europe’s largest activist investor, Cevian Capital, to simplify its business, pursue deals in national markets and improve returns.
A combination of Vodafone UK and Three UK would bring together the third and fourth largest mobile network operators in Britain, though any deal to reduce the number of leading brands from four to three would trigger scrutiny from competition authorities.
Industry executives are hopeful that regulators’ increased awareness of the need to invest in network infrastructure has made them more amenable to mergers than they were in 2016, when the European Commission blocked a proposed merger between O2 and Three.
European telecoms groups have struggled over the past decade, with strong competition and consumer-friendly regulation weighing on earnings. Although Vodafone’s share price has rallied by 3 per cent since the start of the year, the company has shed 44 per cent of its value over the past five years.
Three, meanwhile, has struggled to gain scale over the past few years, despite ambitions to double its size. Though the company has enjoyed an increase in net new customers since mid-2020, it has not managed to translate those gains into significant revenue growth. Last week, the company reported flat quarter-on-quarter revenues of £582mn.
Over the past year, Vodafone chief executive Nick Read has been vocal about his desire to pursue deals in countries he believes suffer from an excess of market competition, including Spain, Italy and the UK.
The exact structure being discussed between Vodafone and CK Hutchison could not be learnt, though Read has said on many occasions that he is focused on pursuing combinations more than outright purchases, given his ambitions to reduce the group’s debt.
Earlier this year, analysts at Enders Analysis noted that Vodafone’s “lack of funding capacity” suggested that in the UK it could look to “form a joint venture with the potential to contribute additional debt or receive cash equalisation payments to assist with leverage reduction”.
Analysts had previously speculated that Vodafone could seek to buy Three but noted that it would need to meet CK Hutchison’s hefty price expectations for the privilege of consolidating the UK mobile market.
Not the Times article but something that appeared in the FT a couple of weeks back along the same lines.
https://www.ft.com/content/658e0a26-3f85-4a41-9a0a-2d0379dd974d