Member Info for fleccy

"Every day after market close they release RNS about buying own shares! But what's the use if its not helping share price?"

Every cloud has a silver lining; In this particular case Vodafone are buying back stock, at rock bottom prices, preventing dilution due to the MCB's. Ironically the low share price is lowering the cost of buying back debt.

"A drowning man will clutch at anything"

Nothing wrong with being underwater, as long as you've got enough air to last as long as you'll need it.

"VOD's goodwill however, who really knows what it contains. As a shareholder you can ring VOD IR and ask them, but I doubt they will tell you. "

The reasoning behind Goodwill is all laid out in the Annual reports; You don't need to ring the company, just read the annual reports.

"Accounting policies
Identifiable intangible assets are recognised when the Group controls the asset, it is probable that future economic benefits attributed to the asset will flow to the Group and the cost of the asset can be reliably measured. Identifiable intangible assets are recognised at fair value when the Group completes a business combination. The determination of the fair values of the separately identified intangibles, is based, to a considerable extent, on management’s judgement.
Goodwill
Goodwill arising on the acquisition of an entity represents the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the entity recognised at the date of acquisition.
Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is not subject to amortisation but is tested for impairment annually or whenever there is evidence that it may be impaired. Goodwill is denominated in the currency of the acquired entity and revalued to the closing exchange rate at each reporting period date. Negative goodwill arising on an acquisition is recognised directly in the income statement.
On disposal of a subsidiary or a joint arrangement, the attributable amount of goodwill is included in the determination of the profit or loss recognised in the income statement on disposal. Finite lived intangible assets Intangible assets with finite lives are stated at acquisition or development cost, less accumulated amortisation. The amortisation period and method is reviewed at least annually. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates.
Licence and spectrum fees
Amortisation periods for licence and spectrum fees are determined primarily by reference to the unexpired licence period, the conditions for licence renewal and whether licences are dependent on specific technologies.
Amortisation is charged to the income statement on a straightline basis over the estimated useful livesfrom the commencement of related network services.

https://www.telcotitans.com/telefonicawatch/spain-to-extend-telefonica-shield-as-macro-headwinds-build/5905.article

"The Spanish government is reportedly set to extend the strategic shield intended to protect critical infrastructure companies from foreign takeovers for a further year, potentially keeping it in place until the end of 2023. The move would continue to make any hostile attempt to acquire Telefónica unlikely to succeed as the Group considers its strategy for the coming three years."

The market is making predatory moves against the Telecom sector, it's pretty clear Telecom stocks are undervalued and potentially easy targets.

"Looks like a good solution to concentrate on the new and let someone else deal with integrating old into new to reduce overall costs."

All the old stuff will go the way of the Dodo. It wouldn't surprise me if there are a miniscule few companies out there still using RS232 for some applications, whereas Engineering students today would say what's RS232. Once PSTN is gone and everything's converged onto IP/Cloud any remaining legacy equipment's and systems will become extinct.

The article states " BT Group today announces a new partnership for its Digital Unit that will transform the business’ approach to its legacy IT estate "

Note "legacy IT estate", with products likely managed from various different platforms, whereas the newer Digital platform likely manages all of the new digital IT products from a single platform. Whereas you might have needed ten people to look after ten different legacy products, you might only need one to look after a single platform managing all the new Digital IT products.
On the transmission side of things, as newer hierarchies came in, you might have needed a team to monitor PDH, and another team monitoring the SDH network, and another monitoring DWDM when that came in, with each one using a different management system and a slightly different skill set. There's probably a very similar scenario with the IT side of things, it appears BT are outsourcing the legacy IT systems they're no longer interested in.
Telecoms companies are always looking at ways to reduce one of their biggest expenses, manpower.

"Does anyone know why this rhetoric has only surfaced today, instead of in November when it appears the article was released"

I meant when it appears the report was released, not article.

The Guardian article is just regurgitating, based on the FT article which appears to be based on the report submitted back in November. Does anyone know why this rhetoric has only surfaced today, instead of in November when it appears the article was released? Because it appears to be old news dressed up and marketed as something new, as far as I can tell.

https://committees.parliament.uk/writtenevidence/113599/pdf/

"You can use either book value or net book value to base your investment decisions on - I was just explaining the different terms and how they are calculated :)"

Isn't the Net Asset value of €56.977 Billion with intangibles taken out anyway?
If you strip out Goodwill, then it doesn't reflect the value paid for the assets or the earnings potential of the assets. Strip out Goodwill and it's like saying the Mona Lisa is only worth the price of the frame and you may as well throw away the canvas. Valuing NAVPS at €0.13 is like shredding the earnings and only assigning value to the nuts and bolts, I wonder what Banksy would say about that lol.

"Subtract the intangibles from the shareholder equity and divide by the shares in issue and that's where the 0.13 NAVPS (it's actually 0.136)"

But it's wrong, you can't subtract goodwill from the Net assets since it undervalues said assets and gives an incorrect valuation of the company. If you strip out goodwill, in the case of a Telecom company, then the figure is meaningless. Dividing Net Assets by shares in issue gives a more correct valuation per share of the assets.

"LSE site defaults to the true meaning of net book so I took the figure from the fundamentals tab. You can see it at the bottom"

I'm not sure where they get their NAVPS of €0.13 from, but using their figures of:

Net Assets 56.977 Billion
Shares in Issue 27.410 Billion

56.977/27.410 = €2.078 Per Share

They probably need to look at the formula in their spreadsheet, since I get a NAVPS of €2.078 using their figures.

"Fleccy - the article clearly says “ it’s legacy IT” estate"

Yeah legacy could be software, hardware, or whatever. What's your point?

Funny how the report, quoted in the FT, was released on the 15th November, yet it's being hyped on the 8th December. Why is it all of a sudden appearing all over the news now?

https://committees.parliament.uk/writtenevidence/113599/pdf/

"Impact of the rise in gilt yields on our Scheme
The period of volatility we saw following the mini-budget was truly unprecedented. Regulators have indicated that events were beyond their past stress tests and were outside of the scenario planning the Scheme had previously conducted. Whilst the level of real rates wasn’t an issue, the pace of change and the dysfunction in the gilt market presented significant operational and liquidity challenges. In common with other DB schemes, we faced significant collateral calls during this period. However, we have a robust liquidity process and run a substantial gilts and cash buffer and have a liquidity ladder we were able to tap into. The liquidity ladder defines the hierarchy of assets that we use to meet liquidity demands, starting with the most liquid on the first rung. The terms of our credit support annexes (CSAs) allow us to use cash or gilts to meet collateral calls so in the first instance we used our existing cash and gilt holdings. When we had exhausted our gilt holdings, we sold equities to generate cash. Constructing and using our liquidity ladder in this way meant that we were able to meet all of our collateral requirements. The Bank of England (BOE) intervened several times to ameliorate the market dysfunction – including buying long-dated conventional gilts, introducing additional repo facilities, and buying inflation-linked gilts. These interventions were welcome and effective. BTPSM is the sole LDI manager of the pension scheme supported by a dedicated in-house operational resource. Having an in-house team with access to assets held in segregated funds put us in a strong position to coordinate portfolio activity and react quickly to manage market volatility. This enabled the Scheme to meet all of its collateral calls without having to sell any of the Scheme’s ILGs and without recourse to our sponsor, BT Group. However, had the BOE not intervened, we would have found it increasingly challenging to meet further collateral calls. During this period, the Scheme’s assets fell significantly prior to the BOE intervention. At the same time, the present value of the Scheme’s liabilities also fell by a similar amount. However, our hedges continued to perform as expected and there was no worsening of our estimated funding position."

"By then the traders will have closed up and moved on....share price recovered as they buy to cover the other side of the table"

Possibly, but I'm fully invested now so I'll only be reinvesting dividends in the ISA's. Dividends from the share dealing accounts will go toward buying in ISA's, before selling stock in the share dealing accounts, a sort of front running bed & ISA strategy.

"The Put Option traders want their profit as high as possible when they close their contract..maybe by mid/end December when the monthly/quarterly Options expire"

Although I find the constant attacks frustrating, on the Telecom sector in general, a lower price is to my advantage as dividends roll in. I'm due to receive my BT and Vodafone dividends in February, they'll be going straight back into stock, meaning more shares for the money at these prices.

If you look at BT and Vodafone, on a one year chart, they're both getting hammered.

https://www.google.com/finance/quote/VOD:LON?sa=X&ved=2ahUKEwiPqd-kxOn7AhWUhFwKHfsNBtMQ_AUoAXoECAIQAw&comparison=LON%3ABT.A&window=1Y

BT is down nearly 34%, with Vodafone down nearly 25%. The chart pattern for both stocks is almost identical, with the BT trace front running the Vodafone trace. In my opinion, Telecoms have been under sustained market attack for years, so I'll just keep holding and adding where I see value until the market games end.

CNBC keep repeating this headline story, even though it's a manufactured story in my opinion. CNBC hardly ever mention BT's positive statements, but they're making a point of slipping this one in. Shake out, shake out, shake out.

"maybe there will be a rights issue to address debt some point. The debt is almost double the market cap"

Would you sell your house when house prices are rock bottom? Thought not, Vodafone are highly unlikely to consider a rights issue with the share price so low; Add to that, they're currently in the midst of a share buyback program to prevent dilution from MCB's, making a rights issue even more unlikely. The dividend's a different matter, and may go if a new CEO decides to drop it.

"As you know fleccy, I have nothing against you personally."

I don't take anything on here personally, I just say what I see and try and back up what I say with examples. We are all entitled to our opinion and I did give other examples of companies divesting of near end of life legacy assets.
You're correct that I have massive faith in BT's strategy, otherwise I wouldn't have invested in the company, and I do have a vested interest in BT doing well which I've never denied.

Thanks for pasting in the story, because the headline doesn't reflect the detail. The story implies that the pension fund could tap BT for more money in short order, but the detail tells a different story.

"It added that, should expected returns fall below a certain level, it may need “more support from BT in future valuations than previously anticipated""

Isn't that obvious in respect of any pension funds investments, at any time, irrespective of the LDI fiasco?

So the FT has scrutinised the BTPS submission to MP's and built a story around a sentence that is true at any time; It's a bit like saying the sun's hot, or we need oxygen to breath, both are true at any time and obvious to anyone aware of the facts. This is a shake out story in my opinion.