One of Vodafone’s biggest shareholders has hailed an activist campaign aimed at improving the telecoms company’s performance as “very sensible”, as another investor said the move was “long overdue”.
The comments will boost the efforts of Cevian Capital, Europe’s largest activist investor with roughly $15 billion in assets under management. It has built an undisclosed stake in Vodafone and wants the telecoms group to restructure its portfolio, reduce assets in underperforming markets and refresh its board to improve lacklustre performance.
Andrew Millington, head of UK equities at Abrdn, a top-10 shareholder in Vodafone, said Cevian’s push to restructure the Vodafone portfolio and drive consolidation was “very sensible”.
“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 towers business.”
Vodafone’s chief executive Nick Read led an IPO of Vodafone’s towers business last year and is looking for acquisitions or industrial mergers with companies such as France’s Orange or Germany’s Deutsche Telekom.
Peter Schoenfeld, founder of New York-based hedge fund PSAM, which has a $120m position in Vodafone, said: “It’s long overdue that a shareholder holds the board accountable for its past actions and inaction, and we think a great deal of value remains to be unlocked. We welcome Cevian.”
Vodafone shares
Vodafone shares have had a bad run, with shareholders losing 9.4 per cent over the past five years. The company has also suffered from a heavy build up of debt after acquiring Liberty Global in 2019. It is trading at 10.3 times 2023 full-year earnings, compared with 13.5 times in the wider sector, according to Numis.
Cevian has not disclosed when it bought a position in the company.
Abrdn’s Millington said: “We’ve noticed a change by Vodafone management over the past six to nine months, talking about being more proactive in taking portfolio action to create value.”
Karen Egan, a senior telecoms analyst at Enders Analysis, said Vodafone’s high debt levels had been a “huge distraction” and that the Liberty Global acquisition has “in no way, shape or form lived up to its promise”.
Schoenfeld echoed calls for Vodafone to try to monetise its towers business, Vantage Towers. “Vodafone should pursue strategic opportunities to try to monetise its towers business quickly, and tax efficiently, either before or after a strategic combination.”
He pointed to transactions with publicly traded towers entities, private equity and infrastructure buyers “at very attractive multiples”.
Brookfield and Swedish asset manager Alecta last week bought 49 per cent of Telia Company’s tower business in Sweden in a deal that valued the business at 28.2 times earnings before interest, taxes, depreciation and amortisation.
Cevian also wants Vodafone to refresh its board, which it has criticised for its absence of telecoms experience. Schoenfeld said he supported this.
“The board really doesn’t have an experienced strategy-oriented member that understands the capital reallocation that needs to take place,” he said. “Management lost credibility when they cut the dividend in 2019 after saying that this wouldn’t be necessary. This has hurt the stock and to date they failed to restore confidence in their leadership.”
But Egan at Enders Analysis said “it’s not at all obvious to me that Vodafone is doing the wrong things” and noted that it has faced regulatory obstacles to consolidation. - Copyright The Financial Times Limited 2022
