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https://www.youtube.com/watch?v=T575Pbo4eWM

GLA

Yes

..and if Vod can land 3% earnings for the full year, surely the div is safe too?

The last 18 months have been hard certainly across the market. I dont have the temperement to use cfds etc and would lose track unless I was 100% focussed on that style of trading.

Big Data and sophisticated trading has certainly changed the way the market behaves in the last 20 years. I am picking up pennies in front of steamrollers

Hi LC,
Its the way I think. The alternate is to dispose of non core business like wholesale country by country. Anti trust will make Vod sell something as a remedy for Liberty

Liberty comes with a cashflow. Maybe we will get more detail in the FY results if the bonds are included

Hi Dan
Would need to read the fine print but bondholders get their money back and a low rate of interest. Equity holders get a high rate of return, currently >10% and if they hold until the end, the proceeds after paying bonds, creditors etc. The net assets are currently >€60Bn. SP suggests it is currently c€36Bn. I would be surprised to see that scale of write down in the next FY accounts..

How much you pay for a share vs an operating business and going concern country by country are very different things. Lots of ways to value a company when it is for sale

Nothing really except Elliott was discussed in context of network asset sales etc.

Elliott took a stake in TI and it cant be coincidence that Vod has indicated it will share 5G spectrum and network coasts with TIM

Hi Dan,

I think the data is too complex to identify a single rate but generally if Vod is borrowing and locking in at lower rates then that is a lower average rate. NR will have an internal weighted average he uses to assess the return on capital employed.The incremental interest charge reported last FY was €0.3Bn while the incremental EBITDA was €0.6Bn. Hopefully NR will have managed the list of oneoffs against FCF for this FY reporting and we will see div maintained etc

The risk premium on top of the BOE/ECB base rates is determined by the quality of the debt/ capacity to meet financial commitments if markets get ugly etc. Vod is still a quality stock and safe to lend to. While Moodys have adjusted Vods rating down, it is marginal reflecting less visibility around Brexit, new trade deals, tweetenomics. There are c $10trillion negative yield bonds globally at the moment competing with higher US interest rates and Trumpean economics.

This FY, Vod auctioned its €600m zero coupon bonds and 50% chose to cash in at a loss and 50% chose to stay at 0%.

Market definitely getting tighter on its financial sustainability/ capacity measures etc. If that is just about interest rates rising, Vods existing debt is generally fixed in lower rates through to 2056. Raising new debt only required to finance incremental cashflows. NR set out tight commercial controls around incremental business and not doing any more heavy lifting for the markets etc

https://www.vodafone.com/content/index/investors/debt_investors/european-shelf.yes.html

...the sound of a distant bell...quiet on here today

https://en.wikipedia.org/wiki/Bond_credit_rating
Moody's rating change doesn't seem to change VODs general ADEQUATE credit worthiness rating.
'An obligor has ADEQUATE capacity to meet its financial commitments. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments'

Well Mr Draghi is keeping rates low for longer. Inflation still at 1.5% so no pressure to raise rates.
The Vod €30Bn euro debt programme draws from this low interest environment for at least another 4 years as set out by the ECB.

Cant see how the markets can see any further or with anymore clarity and presumably will mark the SP up with individual deal certainty country by country, Liberty, network share, retirement of legacy assets, cost savings, etc
https://www.ecb.europa.eu/mopo/implement/omt/html/index.en.html

..and the worry of high 5G spectrum costs in Italy now being shared 50:50 with TIM and incremental network cost savings

Gerry, yes that how I think about it too.

I managed to buy some more yesterday at 132.833. I am cost averaging down and will top slice when the SP recovers c150 155 and put proceeds in a div tracker :-)

Hi Dan, I think the highest rates were sold a long time ago and matured in November 2018. More recently Vod has locked in record low rates for 40 years to 2056 so the average is somewhere around 2% - see link
https://www.vodafone.com/content/index/investors/debt_investors/european-shelf.yes.html

With moodys rerating the average rate will probably rise slightly but EU is a low rate environment compared to Vods older programme in US, which is a higher rate environment...

As in an earlier post, there are currently c$10Trillion bonds globally yielding negative interest rates so a Vod corporate bond is attractive and the risk, imo, of Vod not being able to service the low interest payments is not a high risk..

Dan, yes the accounts are a hard read and we only get 'statutory' analysis from the published financial statements.The moody rating affects risk and new debt is likely to demand a higher interest rate risk premium.
Generally the ECB remains accommodative so the rerating is not imo as onerous as when interest rates were double digits..

Vods accounts say:
Bonds mature between 2018 and 2056 and have interest rates of 0.0% to 8.125% (2017: 0.0% to 8.125%). So even the highest rate is lower than the current yield...
Vod has a 30 billion euro medium-term note programme and a US shelf programme which are used to meet medium to long-term funding requirements.
At 31 March 2018 the total amounts in issue under these programmes split by currency were US$9.9 billion, €18.4 billion, £3.6 billion, AUD 1.2 billion, HKD 2.1 billion, NOK 2.2 billion, CHF 0.7 billion, JPY 10 billion.
At 31 March 2018 the Group had bonds outstanding with a nominal value of €32.3 billion.

So imo Vod is able to continue to borrow at lower rates than the yield required for the equity owner.

For the 30billion euro programme...see page 9 for the list of risks that can apply and can be dependent on the currency etc...
https://www.vodafone.com/content/dam/vodafone/investors/debt_investors/Vodafone%20EMTN%20prospectus.pdf

Dan...I wish Vods SP was nailed to its perch :-) ...not moaning, pining for the Norwegian fjords...

Jack, yes you are right on the service revenue qtr trend.

NR referred to subscriber adds in the last qtr update not pulling through attributable revenues, which suggests price discounting to retain existing and attract new customers. Broadly subscriber revenue growth (if no price rises) can only come by taking market share from another operator, or subscribers taking additional services (like 5G or Liberty quad play).

I guess my point is that marginal revenue is broadly equal to marginal cost and that is a measure of efficiency and the optimal trading position for Vod. That also suggests Vod should be using debt as an optimal financing strategy. Whether it has too much debt is difficult to decide when interest rates remain at historic lows and probably for longer. The balance sheet net assets suggest debt is secure even after write downs in india, probably Italy too(network share?). ECB is making cheap debt available for the next 4 years atm..

I agree your point about synergy saving plans and this points to FCF being maintained and operations better platformed for the future, including Liberty products and services.

I guess its 'jam tomorrow' but that has been the story with each successive technology generation 1G - 4G so why would the market decide 5G is different when it is underwritten by governments. As you say sentiment which I think is compounded by weak politicians and populists.

I also bought yesterday at 133.62 and Tuesday at 135.97 but only with this months dividend income as most of my cash went in at higher prices :-(

Thanks for the considered response which is very clear.
Regards and GLA

Hi Bruce, I agree.

I think the forces at play are predominantly down to the unwind of equity asset inflation by printing QE money over the last 4 years or so. Low interest rates, the current reinvestment of QE monies in EU, the balance sheet unwind in US and the general requirement to finance Gov/ public sector from equity cash flows through debt interest payments or repaying (rolling over...) debt.

GLA