Following the sacking of Vodafone CEO, Nick Read, last month, it is clear that a big shake up is looming at the UK telecoms company.
Read’s exit was executed by the board, but it is clear that activist investors played a not too insignificant part in pushing the board in that direction. Read was blamed for Vodafone’s sluggish operational performance and lethargy in executing key transactions, including the sale of struggling divisions – all combining to produce an underperforming share price for its long suffering Shareholders.
One key and influential investor, Xavier Niel (Atlas Investissement) thinks that Vodafone is “too fat, too slow, too complex”. He called for a “slimmed down company with a “focused European footprint” – and he was not the only one, with other key Shareholders including the likes of Etisalat and Cevian Capital, all believing that that Vodafone needs a refreshed vision.
This obviously has implications for Vodafone’s 65% stake in South Africa’s Vodacom, should Niel have his way, as Vodacom quite clearly does not fit into a focused European footprint strategy. Also, interesting that Vodafone recently finally completed the sale of its 55% stake in Vodafone Egypt to Vodacom. It was an all-share deal resulting in Vodafone increasing its shareholding in Vodacom from 60.5% to 65.1%. Possible strategy to neatly package African investments into one entity for an easy sale process? Well, let’s see if they do the same with Vodafone Ghana which has had a ‘For Sale’ sign on it for many months now.
I know I’m just speculating on a possible Vodacom sale as, I’m sure, that Vodacom is still a valuable asset within the Vodafone portfolio, currently accounting for 13% of overall revenues. However, one could also argue that this may the time get the best price for the asset, especially considering the hefty gross €53bn debt mountain weighing down the Vodafone Balance Sheet. Also, last month Bloomberg reported that Etisalat was eyeing Vodafone’s stake in Vodacom
Methinks where there’s smoke, there’s fire and, definitely, during my investment banking days, the events of the past month would have been more than enough motivation to prepare pitch books to advise on the options for the Vodacom stake. As an Investor, it’s probably time to go overweight on Vodacom?
Frank Ven – Founder, Future Capital www.futurecapital.global