Vodafone sends a message to the market

Thursday, Apr 26 2012 by
7
Vodafone sends a message to the market

FTSE 100 telecoms giant Vodafone (LON:VOD) this week swooped on Cable & Wireless Worldwide (LON:CW.) in a £1.04 billion deal that now seems likely to bring a modestly priced end to a particularly miserable couple of years for the flagging communications group and its shareholders. For Vodafone – currently among the best dividend payers in London – the deal offers some interesting new avenues in the all-important Enterprise market. 

What’s the story? 

Vodafone’s offer of 38p in cash for every CWW share was never at risk of appearing generous although the price represents a near 100 percent premium on where CWW was trading in mid-February when sketchy details of a deal first emerged. No surprise then that the board have recommended it – bringing to a premature end Gavin Darby’s four month tenure as chief executive (CWW’s third CEO in a year) and coming just two years after the demerger of Cable & Wireless Worldwide and Cable & Wireless Communications. For shareholders of CWW, the deal crystallises a generally poor performance over that time, which saw the stock price tumble from 92p to 14p. 

For Vodafone, the acquisition brings with it CWW’s fibre network, which offers numerous cost saving advantages, along with the more significant opportunity to boost its exposure to corporate markets at home and abroad. Two years ago, chief executive Vittorio Colao set out a new growth strategy that included a focus on the Enterprise segment, where there is apparently strong demand for unified communications services. This deal will help Vodafone provide just that. 

What’s the bull case? 

In market conditions where dividends hunters are having a field day, Vodafone’s 5.2 percent current yield (and a forecast yield of 8.3 percent) is among the very best. Its figures were flattered last year from the opening of the dividend taps at its 45 percent owned US business Verizon Wireless, which arrived mid-way through a three year commitment by Colao to produce 7 percent dividend growth annually. The good news is that Verizon Wireless’s first quarter figures released this week were positive and well-received by the market. All eyes on Vodafone’s May prelims, then. 

Dividends apart, Vodafone is rated a ‘buy’ among the majority of analysts – some of which periodically speculate about the possibility of Vodafone and Verizon Wireless merging. Either way, it is…

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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


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Vodafone Group Plc (Vodafone) is a mobile communications company which provides services to mobile voice, messaging, data and fixed line. The Company’s money transfer service, M-Pesa, enables people in emerging markets, to send and receive money through a mobile phone. The Company also has products such as international money transfer, savings and loans, salary disbursements and access to insurance products in different markets. Vodafone Red offers consumers and businesses a package with mobile data allowances, unlimited calls and texts, plus cloud and back-up services to secure personal data. Vodafone Cloud allows customers to store their personal digital content, such as contacts, photos and videos in the Vodafone network and to access it on the move from any connected device. Vodafone OneNet integrates landlines and mobiles providing a communication solution. Vodafone Secure Device Manager gives customer a way to manage many of their smart devices. more »

Share Price (Full)
207p
Change
-1.6%
Mkt Cap (£m)
54,971
P/E (fwd)
36.7
Yield (fwd)
5.5
72

Cable & Wireless Worldwide



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About Ben Hobson

Ben Hobson

Strategies Editor at Stockopedia. Writer, Editor & Investment Strategies Analysis. Test driving and telling the world about the awesome stock market investing tools and resources at Stockopedia. Helping Stockopedia subscribers take control, invest with confidence, beat the market and sleep soundly at night. more »

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