Vodafone top shareholder signals support for activists’ campaign

One of Vodafone’s largest shareholders hailed an activist campaign to improve the telecom company’s operations as “very sensible”, as another investor said the move was “long overdue”. long”.

The comments will boost efforts by Cevian Capital, Europe’s largest activist investor with around $15 billion in assets under management. It has built an undisclosed stake in Vodafone and wants the telecommunications group to restructure its portfolio, reduce assets in underperforming markets and refresh its board to improve its performance. lackluster performance improvement.

Andrew Millington, head of UK equities at Abrdn, a Vodafone top 10 shareholder, said Cevian’s push to restructure Vodafone’s portfolio and push for consolidation was “very sensible”. .

“We would like to see management implementing what they have said they will do around the portfolio, such as consolidation in the market and potential strategic opportunities for their tower business. .”

Vodafone CEO Nick Read led the IPO of Vodafone’s tower business last year and is seeking industrial acquisitions or 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 $120 million position in Vodafone, said: “It is long overdue for a shareholder to be held accountable to the board of directors. values ​​about his past actions and inactions and we think very valuable remain unlocked. We welcome Cevian. ”

Vodafone stock has had a bad run, with shareholders losing 9.4% over the past five years. According to Numis, the company also took on a large debt following its acquisition of Liberty Global in 2019. It is trading at 10.3 times full-year 2023 earnings, compared with 13.5 times in the broader sector. than.

Cevian did not disclose when it purchased a position in the company.

“We’ve seen a shift in Vodafone leadership over the past six to nine months, talking about being more proactive in taking portfolio actions to create value,” said Abrdn’s Millington.

Karen Egan, a senior telecoms analyst at Enders Analysis, said Vodafone’s high debt levels were a “major distraction” and that the Liberty Global acquisition “did not live up to its promises”.

Schoenfeld repeated calls for Vodafone to try to monetize its tower business, Vantage Towers. “Vodafone should pursue strategic opportunities to try to cash in on its tower business quickly and effectively tax it, either before or after the strategic mix.”

He points to deals with publicly traded tower entities, private equity and infrastructure buyers “at very attractive multiples”.

Brookfield and Swedish wealth manager Alecta last week bought 49% Telia Company’s tower business in Sweden in an arrangement valuing the business at 28.2 times earnings before interest, taxes, amortization and amortization.

Cevian also wants Vodafone to refresh its board, which has been criticized for its lack of telecommunications experience. Schoenfeld said he supports this.

“The board really doesn’t have an experienced strategic direction member who understands the reallocation of capital that needs to take place,” he said. “Management was discredited when they cut their dividend in 2019 after saying it was unnecessary. This has hurt the stock, and so far they have not restored confidence in their leadership.”

But Egan at Enders Analysis said “it’s not entirely clear to me that Vodafone is doing the wrong things” and noted that it has faced regulatory obstacles to consolidation.

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