Teleco continues to be, in the words of one investor, “too complex, too slow, too fat”
Nick Read could soon face rows of uneasy shareholders. Vodafone’s CEO reported lackluster results on Tuesday that sent the stock plunging as much as 8%. That could prompt investors to back impatient new shareholder Xavier Niel.
The founder of Iliad acquired 2.5% in September, and urged to accelerate “the rationalization of Vodafone’s footprint.” Read announced in a few weeks a plan to merge his UK business with local Three, the sale of half of his 82% stake in Vantage Towers, the tower business, and a joint venture with Altice to deploy fiber in Germany.
The markets do not seem impressed. The first semester results show that Read’s turnaround still has a long way to go. In Germany, where it earns 30% of its revenue, ebitda fell 7.4%, partly due to customer losses. Global net debt rose to more than 45 billion euros, or 3 times forecast ebitda, reaching the higher range of what Read considers healthy.
Niel has very clear ideas about what to do with the Italian business, which contributed 11% of the income. Iliad tried to buy it at the beginning of the year, but Read rejected the offer of 11,000 million. Now, with revenue from Italy down 5% for the half, Read might have a hard time finding another buyer at that price.
Vodafone also announced 1,000 million in cost cuts. But it is still, in the words of one investor, “too complex, too slow, too fat.” Read is trying to tackle the slow and fat parts. But he hasn’t explained the raison d’être of a firm that owns several European telcos, a listed African subsidiary, a partially listed German business and a lost division in inflationary Turkey, not to mention Australia, Kenya and the Netherlands.
JP Morgan analysts estimate that the sum of these numerous deals could be worth 120 pence per share, more than 20% above the current price. After Tuesday’s slide, shareholders could demand more radical action.
