More investors add their weight to Cevian Capital’s demands earlier in the week
According to the Financial Times [subscription needed], more investors in Vodafone have added their voice to Cevian Capital’s demands for change at the operator, adding to pressures on Vodafone Gruop’s CEO Nick Read (pictured).
Swedish investor activist Cevian, which has acquired an undisclosed stake in Vodafone, is demanding the operator refreshes its board, focuses on consolidation of its key countries’ operations and reduces exposure in underperforming markets.
The FT quoted Andrew Millington, Head of Equities at Abrdn, saying that Cevian’s comments are “very sensible” adding, “We would like to see management execute on what it has said it’s going to do around the portfolio, such as in-market consolidation and potential strategic opportunities for its tower business.”
Abrdn is one of Vodafone’s top 10 shareholders.
Peter Schoenfeld, founder of New York-based hedge fund PSAM, also welcomed Cevian’s comments, according to the FT report. His company has $120 million investment in Vodafone.
German debacle
The operator’s shares have lost almost 10% of their value over the last five years, ostensibly its biggest losses have come from the Indian market, but the operator group has also been criticised for paying too much (€18.4 billion) to acquire Liberty Global’s assets in Germany (as well as in Czecho, Hungary and Romania) in 2019, from which it has not made the expected return on investment.
Equity research house Jefferies cited Vodafone’s struggles in Germany where it seems broadband sales were adversely affected by Covid-19 plus legislation is ending the bundling of cable TV with housing associations’ tenancy charges in Germany, which isn’t likely to help in the short to medium term.
Jefferies highlighted the fact that Vodafone’s CapEx guidance makes no mention of an upgrade to the 8 million homes affected by the change in this legislation with FTTP which could help it stave off competition, leveraging its relationship with customers.
Options elsewhere
Vodafone is also struggling to make money in Italy and Spain, and faces stiff competition in the UK, particularly after the Virgin Mobile O2 merger last year. It is understood that Vodafone was in merger talks with Three UK at the end of last year, but they have hit anti-trust complications regarding the proposed sale of Three’s tower estate to Cellnex.
Analysts at Jefferies said in the research note that it took “several positives” from Cevian’s involvement and supported Vodafone’s ongoing talks to merge with Iliad’s Free in Italy, consolidation of its towerco assets and suggested selling its 50% stake in VodafoneZiggo in the Netherlands.
It said VodafoneZiggo was the “most saleable” of Vodafone’s European assets and that it could raise €3 billion to pay off debt and improve cash flow.
With billionaire Patrick Drahi, founder of Altice group, having upped his stake in the UK’s BT to 18% in December, the role of the activist investor looks to be just getting going in European telcos.