Liberty Global takes 4.92% stake in ‘undervalued’ Vodafone

Mike Fries

Telco Vodafone’s share price has risen rapidly today following the surprise news that Liberty Global has taken a 4.92% stake in the firm. The move follows a tough six months for Vodafone during which its share price has slumped by more than 20% and it has lost its CEO Nick Read. At time of writing, Vodafone was 4% up in trading.

The new Liberty Global stake makes the US-listed firm one of the largest shareholders in the company. However Liberty Global CEO Mike Fries says it is not a precursor for a full takeover bid. He said that Vodafone’s shares are undervalued and described his company’s £1.2 billion outlay on shares as an “opportunistic and financial investment. We believe that Vodafone’s current share price does not reflect the long-term value of their operating businesses, or their consolidation and infrastructure opportunities.”

Investors have long been frustrated by Vodafone’s performance on the stock market, with former chief Read paying the price for lack of progress on this front. Critics of the firm point to its large debt pile and the fact that it has been slow to unlock value and achieve efficiencies. Key problems in recent years have included its loss-making Indian business and a lacklustre performance in the German market.

Liberty Global and Vodafone know each other well. In the Netherlands they jointly control Vodafone Ziggo. However in other markets they are rivals – for example in the UK where Liberty Global owns half of Virgin Media O2, a Vodafone competitor.