Jefferies mulls Vodafone options in wake of Cevian move

Vodafone’s shares rose significantly after activist investor Cevian Capital was reported to have taken an undisclosed stake in the mobile and fixed-line giant, a move welcomed by analysts looking to consolidation to boost the company’s value.

Analysts at Jefferies saw “several positives” from Cevian’s involvement, arguing that it indicated a positive belief in the potential for mergers and acquisitions on the part of a “well-connected investor”.

Among the potential upsides identified by Jefferies for Vodafone going forwards, it included a merger with Iliad in Italy, consolidation of tower assets and the possible sale of its 50% stake in VodafoneZiggo in the Netherlands.

Regarding the latter, described as the “most saleable” of Vodafone’s European assets, it said that a sale could realise €3 billion, enabling Vodafone to cut its debt leverage, with that positive being offset to some extent by the loss of dividend from the venture hitting free cash-flow.

On the downside, Jefferies noted that Vodafone faces problems in Germany, where broadband sales have likely been hit by the pandemic and where legislation ending the bundling of basic cable TV with tenancy charges from housing associations could hit service revenue over the next few years.

Jefferies pointed out that Vodafone’s current capex guidance does not include an upgrade of the eight million affected homes to fibre-to-the-premises, which could head off a competitive threat.

Cevian is believed to want to push Vodafone to be more aggressive in pursuing consolidation in markets including Spain, Italy and the UK, where it faces strong competition.