Vodafone chief under pressure over mega merger: Lack of signal on a telecoms tie-up agitates investors
The boss of Vodafone came under increasing pressure to deliver as a lack of news on potential deals and a cautious outlook left investors wanting.
Chief executive Nick Read said the FTSE 100 telecoms giant is ‘actively pursuing a range of live opportunities’ in a number of European markets but declined to give details.
The comments will fuel speculation of a possible tie-up with rival UK mobile network operator Three after talks between Vodafone and Three’s owner, Hong Kong-based conglomerate CK Hutchison, were reported last week.
Recovery: Vodafone reported an 11% rise in profit to £4.8bn for the year to the end of March alongside a 4% increase in revenue to nearly £39bn
It may also reignite chatter that Vodafone could be eyeing TalkTalk following reports the UK broadband firm was being circled by several major players.
However, there are worries major mergers in the British telecoms market could attract scrutiny from regulators despite Read encouraging the Competition and Markets Authority to ‘look to the US’ which saw its mobile market reduced to three key players through several mergers.
Additionally, the chief executive said the company was looking to sell off part of its stake in Vantage Towers, a German mobile phone mast operator that was spun out from Vodafone and listed on the German stock market last year.
Vodafone owns 81pc of Vantage. However, Read said selling down part of its holding would provide funds for the group and help lower debt levels.
The comments came as Vodafone reported an 11 per cent rise in profit to £4.8billion for the year to the end of March alongside a 4 per cent increase in revenue to nearly £39billion.
But it warned the current trading environment, particularly concerning inflation and surging energy costs, presented ‘challenges’ that were expected to impact the firm’s financial performance in the year ahead.
Read also noted he was ‘not satisfied’ with the firm’s core German business despite the division reporting 6.5 per cent growth in earnings during the year.
The shares crept up 0.2 per cent, or 0.24p, to 0.2 per cent amid investor disappointment around the lack of news on deals and the uncertain outlook.
Vodafone boss Nick Read said the telecoms giant is ‘actively pursuing a range of live opportunities’ in a number of European markets but declined to give details
Carl Murdock-Smith, telecoms analyst at Berenberg, said investors had been ‘frustrated at the lack of progress’ since Vodafone made strong signals about a desire to pursue mergers and acquisitions at its half-year results in November.
He added that while it was ‘obviously hard’ for management to comment on any deals until they were announced, there had been ‘no change in tone’ in the latest results.
Meanwhile, Victoria Scholar, head of investment at Interactive Investor, said Read’s M&A ambitions ‘appear to be floundering’, putting the chief executive in ‘a difficult position’.
Read has come under increasing pressure to revive Vodafone’s lagging share price performance and fend off notorious Swedish activist investor Cevian Capital, which is understood to be pressing for sweeping changes that include restructuring the business and refreshing its board.
Vodafone’s stock has fallen by around a quarter since Read took the helm in 2018.
The business was thrust into the spotlight at the weekend when Abu Dhabi-based telecoms group Etisalat revealed it had snapped up nearly 10 per cent of Vodafone for £3.6billion, making it the firm’s largest shareholder.
It is thought the Etisalat’s support may help Read push back against Cevian, Europe’s biggest activist investor, which this year revealed it had taken a stake in Vodafone.
In February, Read said he was working on merger and acquisition deals ‘at pace’ to quell criticism from Cevian.
Read pointed out he has completed 19 transactions since 2018 – calling his activity ‘unparalleled.’ He also promised to return more money to investors.