Vodafone is still not moving the dial for its unhappy investors | Nils Pratley

However much the telecoms company talks itself up it isn’t doing enough to rescue the share price

Nick Read, chief executive of Vodafone, was pushing his luck in describing the group’s first-half performance as “resilient”, a word nobody would apply to the share price on his watch. He inherited 150p when he was promoted from finance director in 2018 and the poor old shareholders are now looking at 96p, down a thumping 8% on Tuesday.

Since 100p is virtually the lowest the shares had been in the past 20 years, a sense of brewing crisis is unmistakable. Once upon a time – albeit well before Read’s time in charge – Vodafone was the UK’s largest quoted company. Now it is 19th in the FTSE 100 pecking order.

The usual plea in mitigation is that the telecoms market is horrible for every operator everywhere. And, in the round, that’s true. Price increases in a “more for less” industry are always hard to achieve, thus shocks on the revenue or cost line are felt immediately. Covid and accompanying lockdowns whacked roaming charges. Now higher energy costs have added €300m (£262m) to Vodafone’s bill this year, so Tuesday’s downwards nudge in full-year forecasts was hardly a bolt from the blue.

But investors’ frustration with Vodafone runs deeper. The company seems perpetually to fail to meet its potential, while simultaneously claiming a breakthrough lies just around the next corner. Read’s contribution to the overpromising agenda was a bullish presentation a year ago that declared that Vodafone was “structured for value creation” and that “portfolio actions” – dealmaking, in other words – would “improve returns at pace”.

One can’t quite say nothing has happened since then. The Hungarian operation has been sold, a bolt-on acquisition has been made in Portugal and last week Vodafone unveiled a sell-down of its majority stake in Vantage Towers, its German-listed mast business, that may yield the thick end of €6bn. It’s just that none of those actions has been enough to shift the dial at a group carrying net debt of a remarkable €45bn.

The Vantage transaction, which will create a joint venture with private equity, is immensely complicated and the glaring omissions from the deal-doing have been transactions in Spain and Italy, seen as the priorities given their sub-par competitive positions. In Spain, Vodafone was outflanked in the last round of market consolidation; in Italy, it looked at a deal and rejected it. Hopes are now pinned on the UK, where combination talks are happening with Three; UK competition regulators, though, represent a hard-to-read obstacle.

Meanwhile, the one thing investors thought they knew about Vodafone was that its German operation, 30% of the group’s revenues and home of an €18bn cable acquisition in 2018, could be relied upon in all weathers. The company, after all, enjoys the biggest market share in Europe’s biggest telecoms market.

The half-year numbers, though, showed German profits down 7% with “operational challenges” taking the blame. It seems that Vodafone didn’t have IT systems in place to adapt quickly to new consumer legislation. Local management has been changed, and a rebound promised, but the episode will fuel the other big criticism of Vodafone: that it is a telecoms conglomerate that moves slowly.

Read is now offering a fresh €1bn-plus group-wide target for cost savings but, as the share price indicates, it’s needed. Round numbers shouldn’t matter, but they are noticed. Aside from soggy market conditions, sub-100p feels like a case of shareholders hanging up on Vodafone’s pledges to reinvent itself as a slimmer company with a smaller debt pile. Read was paid £4.2m last year and £3.5m the one before. When you’re paid the big bucks, you have to deliver. He is running very short on time.

Sterling’s rally shows old hands know best

In those mad late-September days of Liz Truss and the mini-budget, when the pound briefly fell to $1.04 against the dollar, a few wise old hands trotted out the traditional advice: at two to the dollar (as in 1992 and 2007), the pound is a raging sell; at close to parity, it’s a buy.

Well, the rule of the thumb worked again – so far, at least. Sterling briefly touched $1.20 on Tuesday before settling at roughly $1.19.

The latest leg of the rally, it should be said, is mostly a tale of dollar weakness amid hints from US Federal Reserve officials that the pace of US interest rate increases will slow. But, for rule-followers, explanations are irrelevant. Barring a calamity at Jeremy Hunt’s autumn statement on Thursday, they can chalk up another win.


Nils Pratley

The GuardianTramp

Related Content

Article image
Vodafone has hung up on Nick Read, now it needs to set a radical tone | Nils Pratley
The complacent conglomerate desperately needs a free-thinking chief executive

Nils Pratley

05, Dec, 2022 @6:42 PM

Article image
‘UK travel is on sale’: plunging pound attracts US visitors
Operators catering for inbound tourists enjoy best month for bookings in three years

Gwyn Topham Transport correspondent

01, Oct, 2022 @6:00 AM

Article image
Despite the political pantomime, it’s been a good year for the FTSE 100 | Nils Pratley
A weak pound, even after a rally once Liz Truss and Kwasi Kwarteng had been bundled off stage, helped

Nils Pratley

22, Dec, 2022 @6:09 PM

Article image
Pound hits all-time low against dollar after mini-budget rocks markets
Odds of sterling hitting parity with dollar jump, as analysts say UK bond market ‘getting smoked’ by giveaway

Graeme Wearden

26, Sep, 2022 @7:06 AM

Article image
Despite its optimism Marston’s pint glass is less than half full | Nils Pratley
Hope springs eternal in the boardroom, but the stock market is not as upbeat about the hospitality sector

Nils Pratley

06, Dec, 2022 @6:46 PM

Article image
The Bank’s newfound appetite to tackle risk is welcome, if a little late | Nils Pratley
The financial policy committee has decided to take on ‘shadow banking’ which has been thriving since 2008

Nils Pratley

13, Dec, 2022 @7:20 PM

Article image
Meta mass sackings show Mark Zuckerberg is rattled
Investors only have themselves to blame for not insisting on equal voting rights to rein in tech pioneer

Nils Pratley

09, Nov, 2022 @7:05 PM

Article image
Twitter’s board deserves credit for Elon Musk’s U-turn
By sticking to its guns the firm has defended the excellent principle that bidders should do what they’ve agreed to do

Nils Pratley

05, Oct, 2022 @7:42 PM

Article image
The mini-budget that broke Britain – and Liz Truss
From soaring mortgage costs to a sterling slump, the fiscal event set off a chain of chaos that led to PM’s downfall

Richard Partington Economics correspondent

20, Oct, 2022 @4:22 PM

Article image
Pound falls below $1.09 for first time since 1985 following mini-budget
Sell-off as investors take fright at prospect of surge in government borrowing to cover huge tax cuts

Richard Partington and Angela Monaghan

23, Sep, 2022 @2:03 PM