Activist investor Cevian has targeted Vodafone
(Picture: REUTERS)Vodafone boss Nick Read today sought to fend off pressure from the activist investor at his door with a set of strong numbers and a promise to improve returns “at pace.”
Vodafone said service revenue, a key measure, rose by 2.7% to €9.6 billion in the three months to the end of December, with growth in both Europe and Africa. That was slightly ahead of City estimates.
Read highlighted Vodafone’s mobile phone business as a particular bright spot, with strong demand for new iPhones and a good Black Friday. In the UK, the operator signed up 152,000 new mobile customers in the period and consumer churn dropped to a near record low.
Across the business the UK and Germany performed well, while Italy and Spain dragged on overall performance.
Read called it a “good performance” overall and said Vodafone was on track to meet full-year forecasts, which were upgraded in November. He said he was “committed to creating value for our shareholders through proactive portfolio actions and continuing to improve returns at pace.”
Vodafone is facing pressure from Sweden’s Cevian, an activist investor that has reportedly been building a stake in the business. The fund’s intentions are not yet clear but analysts speculate it could push Vodafone to speed up disposals. Ben Barringer, an analyst at Quilter Cheviot, said Cevian’s presence “will put management’s feet to the fire.”
Read declined to comment on whether Vodafone had engaged with Cevian but defended his record. Read has done 19 transactions in three years since taking charge, calling his pace of action “unparalleled.”
Vodafone’s share price has yet to see the benefit, with the stock down 13% since he took charge. Investors are still smarting from a dividend cut in 2019.
This morning, the share price improved 3.4p - or 2.6% - to 131.4p.
Read is eying more deals in his push to improve performance and is said to have held talks about buying UK mobile operator Three.
He declined to comment on the specifics but said consolidation more generally made sense.
“We think this is the right time for consolidation,” he told the Standard. “It’s needed to accelerate investment. The UK and EU are falling behind on 5G.
“Policymakers understand the need for a new balance between: yes, we want competitive prices but we also need investment. Through the pandemic they woke up to the fact that we are critical infrastructure.”
Read said Vodafone was evaluating a range of possible targets: “It’s going to come down to are they pragmatic, are they reasonable on price and are they aligned on strategy.”
Richard Hunter, head of markets at Interactive Investor, said Vodafone was “grinding higher” with today’s figures.
He said: “Despite the possibility of Vodafone becoming the perennial underperformer and ‘jam tomorrow’ stock, its supporters remain resolute on prospects, and the market consensus of the shares as a strong buy remains defiantly in place.”
Comment: How much ‘constructive’ criticism does Cevian really have for Vodafone?
