Ringing in the changes
An activist investor has taken a stake in Vodafone and will push for longoverdue action at the telecoms group. Matthew Partridge reports
Vodafone’s shares have been given a lift by the news that a Swedish activist investor with stakes in Aviva and Pearson has “trained its sights on the FTSE 100 telecoms group”, says Dominic Walsh in The Times. Cevian Capital, one of Europe’s biggest activists, will put chief executive Nick Read “under pressure to outline his own plans to revive the share price and speed up growth”. While the stake is still relatively small, Cevian is expected to buy more shares in the near future, with a view to getting seats on the board.
It’s no wonder that Cevian is “piling pressure” on Vodafone’s management, says Gwyn Topham in The Guardian. After all, Vodafone’s shares “have almost halved in value since 2018”, with investors unhappy over a “series of acquisitions and sell-offs”. Many believe Vodafone “overpaid for assets such as the German cable business it acquired in an €18bn deal”. Indeed, Reed was forced to accept cuts to his pay in 2019 in order to “head off an investors’ revolt” that was prompted by the fact that Vodafone “said it could not pay a dividend after incurring huge losses in buying up 5G spectrum in European auctions”.
Accelerating the transformation
It’s true that many investors are frustrated at “stalling momentum and poor growth” in many of Vodafone’s major markets, say Ben Woods and Hannah Boland in The Daily Telegraph. However, despite these problems Read isn’t immediately at risk of being ousted, Abrdn, the group’s fourth-largest investor, say his plans for creating value had the “widespread support of shareholders”. Indeed, it looks like Cevian, which is already known for pushing for transformation of the insurance giant Aviva and the education group Pearson, simply wants to “accelerate” this existing strategy, rather than force through “short-term dramatic changes”.
Still, there’s no getting away from the fact that Read will need to move more quickly, says Helen Thomas in the Financial Times. One easy change would be to overhaul the board, which is currently long on “City grandees and serial non-executives”, but “almost bizarrely underpowered in telecoms experience”. However, he will also need to “improve performance at Vodafone’s ailing operations”, while “quickly focusing resources and attention on assets with potential”, and “act meaningfully on murmurings of consolidation or simplification”.
Boosting Vodafone’s value through mergers, acquisitions and asset sales will be easier said than done, says Ed Cropley on Breakingviews. “Fully spinning off Vodafone’s African and newly listed mobile towers unit would not obviously unlock much value,” while the company is “too big to be a takeover target for all but the very largest predators.” That leaves “consolidation in Vodafone’s main European markets” as the only viable option, which makes sense given the “massive investment required in new technology”. However, such a strategy “is worryingly reliant on the acquiescence of competition watchdogs”.