Vodafone takeover puts skids under internet rival
PLUCKY internet cable layer Cityfibre caused a stir in the UK last year when it announced an ambitious tie-up with Vodafone.
The companies took the fight to BT and Virgin Media with plans to connect up to 5m homes with cutting-edge fibre-optic cables – but analysts are raising questions about the partnership.
Vodafone has confirmed it is once again in talks with cable group Liberty Global, with the British telecoms giant saying it could snap up some of Liberty’s European empire.
It marks a return to the negotiating table after 2015 discussions about an asset swap ground to a halt. But the fresh courtship won a lukewarm response from investors yesterday, with Voda shares dipping 4.1pc, or 8.8p, to 210.7p.
Mike van Dulken, head of research at Accendo Markets, also suggested the company may scale back its partnership with Cityfibre in the UK as part of a potential deal, which reports said could be worth more than £12bn overall.
Liberty owns Virgin Media, which is also competing to upgrade the UK’s broadband infrastructure.
Van Dulken said: ‘A Vodafone-Liberty transaction could mean the Cityfibre partnership suffers, especially if continental assets offer better investment opportunities.’
A source close to Cityfibre insisted the potential deal was not seen as a threat.
But in a note, analysts at Liberum recommended buying Cityfibre shares while they languished at three-month lows.
‘We believe the market is big enough for multiple players and Cityfibre is better positioned than others,’ wrote Janardan Menon and Alexandre Schmidt.
Cityfibre shares closed 0.6pc, or 0.3p, down at 49.5p. Another analyst note appeared to still be weighing on online estate agent
Purplebricks, with the stock sinking 7.2pc, or 30.2p, to 388.4p.
Jefferies likened selling properties on the website to ‘a £1,000 coin toss’ – a reference to its average revenue per customer. Its research found Purplebricks had a success rate of 51pc. The firm insists it sells 78pc of homes listed.
But Jefferies said Purplebricks ranked in the middle of 7,000 agents it looked at, adding its business model had not been properly tested.
‘Our concern is that the group has expanded quickly across three continents before the model has been proven and therefore the shares are priced for perfection’, the note on Thursday said.
Meanwhile, Cineworld rose after the company issued 1bn shares. The price per share was adjusted from 518.5p to 230.8p after Friday’s close to reflect the extra stock issued. In the first day of trading with the adjusted figure, they rose 6.9pc, or 15.9p, to 245.2p. It followed a vote by the company’s shareholders to back its blockbuster merger with US rival Regal Entertainment.
The £2.7bn deal, expected to complete in March, will see the pair combine to form the world’s second-largest cinema group. Closer to home, B&Q’s parent,
Kingfisher, benefited from trouble at rival DIY chain Homebase.
Shares in the London-based firm were up 2.3pc, or 7.9p, to 357.3p after Australia’s Wesfarmers admitted to bungling its takeover of Homebase.
The disastrous acquisition has resulted in a £544m write-down and has prompted a review of the entire UK business.
Wesfarmers managing director Rob Scott said this was ‘obviously disappointing’. Up to 40 stores could be shut as part of the review, it was revealed.
And after a torrid week for outsourcer Capita – including a shares plunge from almost 350p to 182.5p after a profit warning – things improved slightly. Shares rose 7.3pc, or 11.8p, to 174.1p.