Investing in the new Vodafone requires patience. For Europe's largest telecoms group by market value, the focus has switched from M&A to fundamentals. That means upgrading networks, integrating acquisitions and scrapping for customers. This will be a slog. At least shareholders are being rewarded for loyalty.
Deal-making has been crucial of late. Chief Executive Vittorio Colao ended a US impasse by selling out the Verizon stake for an impressive $130 billion, just as competition stirred. He bought German and Spanish cable outfits at full prices, acknowledging the competitive disadvantages that mobile-only businesses are facing. And, Vodafone also merited a bid premium, as Europe's only large group to be free from both state involvement and a landline legacy - while AT&T was musing about the attractions of the old continent.
That no longer applies. AT&T has grown cold and is busy buying DirecTV back home for $70 billion. Japanese group SoftBank is also tied up Stateside. And Vodafone itself is running short of targets. So it's back to basics. A £19-billion, two-year spending blitz, "Project Spring," recognises network quality is paramount in the mobile broadband era. European takeovers need to bed down. And, Vodafone must recover in big markets: especially Germany, where it has under-spent and underperformed, and Italy, where price wars still smoulder.
Full-year numbers, released on May 20, suggest this will be a grind. Surprisingly weak results and outlook knocked Vodafone's stock four per cent. Forecast Ebitda of £11.4 to £11.9 billion for 2014-15 undershot consensus by four per cent, Jefferies says.
The hope is that increased investment, economic recovery, and wider market consolidation will benefit Vodafone in Europe, while India, South Africa and other emerging markets offer a nice growth kicker. Perhaps. Enthusiasts at JPMorgan reckon Ebitda will hit £13.2 billion by 2016-17. That puts Vodafone on an enterprise value of just 5.4 times that year's Ebitda, versus the 6.3 times Deutsche Telekom is trading at.
Shareholders may want to see more evidence. In the meantime, hard cash will help. Vodafone offers a dividend yield of more than 5.2 per cent. That is far above the 3.2 per cent FTSE 100 average. Many will want to stay on hold.
Deal-making has been crucial of late. Chief Executive Vittorio Colao ended a US impasse by selling out the Verizon stake for an impressive $130 billion, just as competition stirred. He bought German and Spanish cable outfits at full prices, acknowledging the competitive disadvantages that mobile-only businesses are facing. And, Vodafone also merited a bid premium, as Europe's only large group to be free from both state involvement and a landline legacy - while AT&T was musing about the attractions of the old continent.
That no longer applies. AT&T has grown cold and is busy buying DirecTV back home for $70 billion. Japanese group SoftBank is also tied up Stateside. And Vodafone itself is running short of targets. So it's back to basics. A £19-billion, two-year spending blitz, "Project Spring," recognises network quality is paramount in the mobile broadband era. European takeovers need to bed down. And, Vodafone must recover in big markets: especially Germany, where it has under-spent and underperformed, and Italy, where price wars still smoulder.
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The hope is that increased investment, economic recovery, and wider market consolidation will benefit Vodafone in Europe, while India, South Africa and other emerging markets offer a nice growth kicker. Perhaps. Enthusiasts at JPMorgan reckon Ebitda will hit £13.2 billion by 2016-17. That puts Vodafone on an enterprise value of just 5.4 times that year's Ebitda, versus the 6.3 times Deutsche Telekom is trading at.
Shareholders may want to see more evidence. In the meantime, hard cash will help. Vodafone offers a dividend yield of more than 5.2 per cent. That is far above the 3.2 per cent FTSE 100 average. Many will want to stay on hold.