Ben
28th January 2010, 12:30 PM
"Investors in Vodafone are stepping up pressure on CEO Vittorio Colao to find a solution to the groups underperforming European operations and its inability to extract cash from Verizon Wireless, its US business. The Financial Times reports today that Colao risks facing calls for Vodafone to be broken up if he does not close the gap between its market capitalisation and analysts sum-of the-parts valuations. One unnamed investor said that Colao must either accept a slimmed-down Vodafone as a way forward for the group or come out with a defense as to why all the assets fit together. One option being touted is a split between Vodafones mature European businesses and its growing emerging markets. Bernstein analysts estimate that Vodafones shares are trading at about a 30 percent discount to the fair value of the firm's controlled assets, rising to 40 percent after factoring in a resumption of dividends from Verizon Wireless. This compares with an average discount of 25 percent for European telecoms companies.
The situation at Verizon Wireless in which Vodafone owns a 45 percent stake has dogged the UK-based group for some years. The US mobile operator accounts for 37 percent of Vodafones earnings but none of its cash flow; Vodafone has not received a Verizon Wireless dividend since 2005 and is not expected to until at least 2012. Last year, Colao stated that solving the US was the biggest issue facing his stewardship. Vodafone says it keeps its options at Verizon Wireless under regular review, including the case for selling all or part of the stake back to Verizon Communication (Verizon Wireless 55 percent majority shareholder). Citi analysts value the stake at US$44.5 billion."
http://www.mobilebusinessbriefing.com/article/investors-call-for-voda-break-up
In my humblest of opinions, Vodafone works because it's big. A fractured Vodafone would weaken it significantly, particularly in mature markets. This is shareholders looking to make a quick buck.
The situation at Verizon Wireless in which Vodafone owns a 45 percent stake has dogged the UK-based group for some years. The US mobile operator accounts for 37 percent of Vodafones earnings but none of its cash flow; Vodafone has not received a Verizon Wireless dividend since 2005 and is not expected to until at least 2012. Last year, Colao stated that solving the US was the biggest issue facing his stewardship. Vodafone says it keeps its options at Verizon Wireless under regular review, including the case for selling all or part of the stake back to Verizon Communication (Verizon Wireless 55 percent majority shareholder). Citi analysts value the stake at US$44.5 billion."
http://www.mobilebusinessbriefing.com/article/investors-call-for-voda-break-up
In my humblest of opinions, Vodafone works because it's big. A fractured Vodafone would weaken it significantly, particularly in mature markets. This is shareholders looking to make a quick buck.