Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
'Your phone bills are almost certainly going up at the end of this month as mobile providers across the board hike prices. If you are being hit by the hikes then here are the best deals to help get things back under control.'
https://www.express.co.uk/life-style/science-technology/1743834/android-iphone-bill-o2-ee-vodaphone-deals
Fleccy, yes that's fair. Thirty things dragging the share price down and twenty nine things pulling the share price up. The next week should tell us if the market thinks twenty nine things dragging the share price down and thirty things pulling the share price up. Todays RNS says the cost of servicing debt is going down so good news especially as the dividend is being maintained. Just a waiting game...with feb/june dividend to compensate for the holding cost of invested capital. Anyways, feb div will clear my xmas credit card.
Happy Xmas all
Gary, yep energy costs are a problem. It could have been worse if VOD hadnt done something about it.
In H1 presentation they said this about Energy costs
• FY23 93% hedged (+€300m YoY)
• FY24 c.50% hedged at €207/MWh
• Further +€500m YoY @ spot prices
• Potential government intervention
• Renewable PPAs for structural price anchoring (>30% from FY25)
Wage inflation
• Low single digit payroll inflation in FY23, to further increase in FY24
Also, VOD is taking price action across European markets with CPI+ linked pricing
While VOD has flexible contracts & vulnerable customer protections in place, its really a bellweather for the problems to come across all buinesses not just VOD.
I still like the word 'Resilient' to describe performance.
I also like their statement 'Committed to min. 9c. dividend p.a.'
Page 43 is worth a look ie the increase in net debt from year end €41.6Bn to H1 €45.5Bn due to net collateral liabilities and timing differences.
In particular, FY22 €2.2Bn increases to H1 €7.6Bn.
The group accounting policy causing the timing difference says:
'The Group invests surplus cash positions across a portfolio of short-term investments to manage liquidity and credit risk whilst achieving suitable returns. Collateral arrangements on derivative financial instruments result in cash being paid/(held), repayable when the derivatives are settled. These assets do not meet the definition of cash and cash equivalents but are included in the Group’s net debt based on their liquidity.'
https://investors.vodafone.com/sites/vodafone-ir/files/2022-11/vodafone-h1-fy23-results-presentation.pdf
Looking at the H1 presentation:
The Increase in net debt at the half year is due to MCB buy-back, timing of dividend payments & FCF phasing
Free cash flow weighted to H2 reflecting the seasonality of working capital and €1.7bn spectrum payment in Italy already in net debt
Debt rating agencies and investment community use net debt as follows:
'Gross debt less cash and cash equivalents, short-term investments, derivative financial instruments excluding mark-to-market adjustments and net collateral assets.'
At 31 March 2022 €m
GROSS BORROWING(70,092)
Lease liabilities 12,539
Bank borrowings secured against Indian assets 1,382
Collateral liabilities 2,914
GROSS DEBT (53,257)
Collateral liabilities (2,914)
Cash and cash equivalents 7,496
Short-term investments 4,795
Collateral assets 698
Derivative financial instruments 2,954
Less mark-to-market (gains)/losses deferred in hedge reserves (1,350)
NET DEBT (41,578)
' It'll be another headache for regulators to untangle the web of Tower ownership'
It will come down to the strength of each CEOS regulatory strategy and their own corporate strategies. Its possible VOD could retain control of Vantage and share in MBNL under some form of 'equivalence' principle like when Openreach was carved out but consolidates into the BT Group. Long term I thought the idea of 1 urban mobile network operator and 1 rural mobile network operator in the UK was a good solution to drawn out regulatory disputes between so many operators and referring matters to competition advisory tribunals etc. In the end, some form of remedy from winners to losers
' I could see them taking legal action if a merger was waived through'
I think they take legal action as a matter of course and to get a remedy. All those high street zombie shop fronts need consolidating and rebranding now you can buy online. I cant remember the last time I went into a phone shop. When I think 3, I think 5...their job as a 'new entrant' disruptor is done and we now have the consumer mobile internet. Next phase could be eg making Hutch ports Smarter and need VOD UK. That would be a big account and attract FDI. Win Win for UK PLC imo
Mulder, thanks for that analysis.
Looking at historic OECD data, Asia pac countries leverage mobile revenues off low debt to high income ratios while the Americas have low income to high debt ratios. UK is in the middle and slightly better than EU. It makes sense that Asia pac markets are generally less developed and less competitive than western markets so investment in infrastructure is lower.
10 years or so ago, the UK had the highest mobile revenue to debt ratio in the OECD and gave some of it up in an accelerated reduction in mobile termination rates in which 3 was the 'new entrant' agitator, drawing a line under long run incremental costs across EU and a tipping point to data economics and data network architectures....
In the end to end process we saw EE restructuring and many other examples of multi lateral reciprocation such as VOD increasing network investments in Germany. All of this was due to Globalisation (WTO, GATTS rules etc) and European alignment of policy interests giving us in the UK the local flavour of competition between firms ie the number of licensed mobile operators and consumer choice....
So in the current round of trade agreements, if our policy makers are any good, they will be callibrating for the comparative debt leverage ratios and, fingers crossed, allowing the market to consolidate.
For example, if Sunak and Hunt have their fingers on the pulse, they wont be throwing the baby out with the bathwater, and they will encourage the VOD 3UK consolidation as a catalyst for the next stage of regulated telecoms in the UK, Europe and Globally (eg China opening up again and India in particular because of its size) as part of coordinated trade policy agreements.
Vodafone wont be thrown to the wolves imo. In fact, with Reid promoting the principles of access to mobile internet as a human right, probably (as who else cares?) underpin the principles of free trade/ trade agreements and probably a return to WTO/OECD regulation using debt ratios relative to GDP for all the countries that VOD operates in.
So I still like the word 'resilient' in the face of the negotiations ahead. The current SP is a once in a lifetime bargain imo
possible they could have been looking for quick working capital/ cashflow hence the broker rating and the SP quickly following suit. If so, hope that means VOD SP will move up from here?
https://www.thisismoney.co.uk/money/markets/article-11462875/Credit-Suisse-hit-74bn-withdrawals.html
'With the current economy, I imagine less money going in and more coming out.'
https://www.msn.com/en-gb/money/news/crypto-lending-company-genesis-suspends-withdrawals-reportedly-considering-bankruptcy/vi-AA14t6EM?ocid=msedgdhp&pc=U531&cvid=1c3b0af3ab924f2096422cbf50e68fad
'The only thing that surprises me, is that the vested interest players have managed to keep the music going so long'
I suspect you are right. More money was going in than coming out. With the current economy, I imagine less money going in and more coming out. In the end, if something is unregulated and operates outside a generally accepted legal framework, then it's the wild west. Some innovative products are emerging in the ecosystem, like blockchain?, and could have commercial and security advantages over legacy products or ew risks that need to be managed
'What amazes me is how Billions can be poured into Crypto currency,'
I havent researched crypto but I believe it is 'borderless'. The ability to move large sums around the world might have an attraction for those who would otherwise face hefty tax bills. Similar to offshore operating and holding companies who only pay tax on service provided in the UK
Anything can happen now I guess. Really Read should sack alot of the deadwood workforce or deliver an ultimatum like Musk about productivity. The money saved would then be used to pay down debt at the same time he is raising prices. Cutting the dividend is a red herring to suit short term trading strategies narrative imo.
Long term the regulator has to allow consolidation if it wants Vod to maintain employment levels and service the associated debt.
National fibonacci day today woohoo!!
'morcambe and wise, hrrrmph...****nal'
Bring me sunshine, in your smile
Bring me laughter, all the while
In this world where we live
There should be more happiness
So much joy you can give
To each brand new bright tomorrow
Make me happy, through the years
Never bring me, any tears
Let your arms be as warm
As the sun from up above
Bring me fun, bring me sunshine
Bring me love
Bring me sunshine, in your smile
Bring me laughter, all the while
In this world where we live
There should be more happiness
So much joy you can give
To each brand new bright tomorrow
Make me happy, through the years
Never bring me, any tears
Let your arms be as warm
As the sun from up above
Bring me fun, bring me sunshine
Bring me love, sweet love
Bring me fun, bring me sunshine
Bring me love