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"Surely you wouldn’t invest such large sums unless you were very confident of significant life changing gains.
I think 90-£1 achievable after a good update 14 may then upward from there. I’d be over the moon with £1-£1.30 this year plus dividends. No building society will beat those returns"
What sort of good results are expected to push the price up to those levels?
I suspect the directors will expect to see steady gains over the next few years if all goes according to plan. Certainly very unlikely to be expecting anything transformative in the next few months or even this year, otherwise the buys would look very dodgy. It's a good vote of confidence in their belief in the future direction over the coming years.
I expect the CMA to announce a phase 2 investigation into the Vodafone/3 merger this week, so wouldn't be surprised if the UK results echo those of 3 to hammer home their case for the merger and I don't see anything other than incremental changes from the last set of results in the hope that they will meet this years targets but happy to be surprised.
It will certainly be interesting to see where the remaining Vodafone Spain/Italy money is going to be spent.
The flip side is that the capability should hopefully provide some reassurance to the CMA that the Vodafone/3 merger still leaves consumer/businesses with options that they may not have had even a few years ago and that consolidation is no bad thing.
"Don't get me wrong, Starlink is a great niche product but can we please stop pretending it can scale to compete with Telecoms. If technology existed that allowed the scale necessary, don't you think Telecoms would be deploying it right now instead of spending billions on 5g and fibre."
Low Earth Orbit satellites look more than capable of grabbing market share in areas such as IoT etc. In mature markets where the telcos have tight margins and are starved of growth opportunities that they can monetise, it's competition, that seems to be improving leaps and bounds year on year, they could do without.
I think the deal being referred to Phase 2 was pretty much guaranteed.
https://www.gov.uk/government/news/vodafone-three-deal-could-leave-consumers-and-businesses-worse-off
“What does this mean? As a separate company or spinoff? Separate for reporting purposes? Will Vod holders get shares in this split out?
Please clarify.”
As below:
https://www.rcrwireless.com/20240116/internet-of-things-4/vodafone-to-spin-off-iot-unit-in-2024-with-major-microsoft-cloud-tie-up/amp
"Namely - as Europe is overcoming recession, revenue will start growing quicker (with the added benefit of not wasting money keeping afloat section of the business that were underperforming i.e. Italy and Spain and releasing resources for additional investment where they earn their cost of capital), lower interest rates making debt burden easier to service, merger with three in the UK and overall more business friendly attitude by regulators and finally very cheap valuation which could result in a takeover deal."
I don't think any of those are out of the question, although I'm not sure who would want to buy Vodafone in it's entirety. Maybe private equity so they can asset strip. I definitely believe selling Vodafone Spain and Italy was the right thing to do as they would have only depreciated further in value under the current management.
"yes, it hasn't crashed from the halving of dividend, Italian sale and investing 4 Billion in Vodafone shares announcement"
It's more or less the same, so they have all just cancelled each other out? Assets sold to generate cash to buy back shares is viewed as zero sum?
"Providing profitability remains at least the same, then the money spent will be replenished, meaning that providing the market does not give a lower valuation to the business, and because shares are fewer in number, that would mean the price per share would be greater."
But the buy backs are not being funded with profits. They are being funded by selling off chunks of the business that won't be replenished.
According to the article being referred to:
https://hbr.org/2001/04/is-a-share-buyback-right-for-your-company
"Contrary to the common wisdom, buybacks don’t create value by increasing earnings per share. The company has, after all, spent cash to purchase those shares, and investors will adjust their valuations to reflect the reductions in both cash and shares, thereby canceling out any earnings-per-share effect. If increasing earnings per share were the only rationale for buybacks, they would have no impact on value"
"If I have a company worth £10 million and it has 10 million shares at a £1 each, using £5 million of the company’s cash to buy back 5 million shares means I'm left with a company still worth £10million (in the balance sheet of the company cash is substituted by the 5 million shares). The residual outstanding 5 million shares are now worth £2 each. "
In the scenario above, it sounds like the shares haven't been cancelled. It should like there would still be 10 million shares but the company would just own half of them?
"KeRow,
The companies cash in the bank is only a very small factor in the calculation of the market capitalization, so your argument is flawed. You are confusing the companies cash position with market capitalization (worth).
Many companies are in net debt after assets and liabilities are factored in, and yet their market capitalization is positive, not negative, because revenues, profits and cash flow are bigger factors for the MC."
Thanks for the reply.
It is still selling off an asset and using the cash to buy back your own shares rather than, for example, using excess profits such as when an oil &gas company might buy back shares when the oil price has been higher than expected. So why would selling off an asset/using cash on your balance sheet boost the price rather than just cancel each other out?
It just seems like moving money around as the market cap will be less and the number of shares will be less. I'm oversimplifying but I'm not clear where the value that will translate into a share price increase will be unlocked. Is the belief that once the company is 4 billion lighter, it will be worth the same?
"Rob
''i suspect it will be of no benefit whatsoever''
it is a 4 Billion euro benefit to shareholders."
But Vodafone will have 4 billion less cash afterwards, so why should it translate to a price increase?
If I have a company worth £10 million and it has 10 millions shares at a £1 each, using £5 million of the companies cash to buy back 5 million shares means I'm left with a company worth £5million with 5 million shares worth £1 each.
"'is selling core business units and doing buybacks.''
Not sure if part of a portfolio not make a profit can be classed as much of a core 'business'. "
Vodafone Spain and Italy were core as much as they were in the same business in those countries as they are in the UK etc. They just couldn't get a decent return in those countries as they struggled to complete, so getting rid was probably better than further managed, or mismanaged, decline.
"So, next week we have the competition regulators who have until Friday to decide whether to launch a further investigation into the deal / merger with Three3. SP to rise if they don’t or vice versa if they do?"
I'd say that it's very likely to go to phase 2, so more upside if it doesn't than downside if does.
"Half the posts here are seeing this as good news and looking forward to the SP growing in the next few months/years with mention of it breaking the 100p and half the posts here are doom and gloom and the SP will be droping, even mention of 35p! Looking at the SP today and the buy vs sells the market is similarly confused too!"
The share price going up to 100p would certainly make the share buybacks less impactful. Divi cuts/buybacks just seem to put a ceiling on the price rather than a floor.
At least if the divi going forward is based on any growth, it should be perceived as being sustainable which it clearly wasn't until now.
"Sale of Spain + Italy = 12bn. Current market cap c20bn. Vodafone have "recovered" 60% of the current market cap from two non core areas of their business AND they state the transactions are expected to be adjusted earnings positive. VOD is well undervalued. E& knew they were buying into a good fortune storey over the next five years. "
They have turned an asset into cash. They haven't conjured 12bn out of thin air.
I think selling them off is for the best as the current management team didn't seem to have the stomach or capability to turn them around.
"Porsche, it is churlish to say that buybacks are a complete waste of money. If VOD do as they say they will & spend 4 billion buying shares this is a saving of 88 million pounds on dividend payments alone."
They'd make more putting it in a saving account
Google Translate:
*** Vodafone-Fastweb: advisor at work, the agreement is close
March 13, 2024
(Il Sole 24 Ore Radiocor Plus) - Rome, 13 March - Close on the agreement between Swisscom, parent company of Fastweb, and the Vodafone group on the sale of Vodafone Italia. According to what Radiocor understands, the advisors are are the final details in Milan and an agreement is probably expected, within the week.
The negotiation exclusive, announced on 28 February, for the sale of 100% of Vodafone Italia to Swisscom and the subsequent merger with Fastweb, starts from an offer of 8 billion euros in cash and without debt.
The transaction, once the regulatory green light has been was obtained, created the first operator in Italy for fiber to the home (FTTH) with a market share of 36 percent. The Vodafone-Fastweb merger, compared to the Iliad-Fastweb merger,, would at first glance, has fewer antitrust risks.
At the end of January, Vodafone had had rejected the offer from the French group Iliadd envisaged a merger of the two telephone companies in Italy through a joint operation, 6.6 billion euros in cash to Vodafone and a loan for shareholders of 2 billion, based on a company value of 10.45 billion.
"This morning I read that Vodafone and Swisscom will probably close the agreement by the end of this week (Il Sole 24 Ore). Did you find similar news?"
https://www.ilsole24ore.com/radiocor/nRC_13.03.2024_19.59_73310733