Analysts give their opinions on Vodafone's vaunted US telecom sale to Verizon
*Will Draper, Espirito Santo
*
The consensus is that shareholders would get around 70% of the proceeds via a share buyback or special dividend. So if the deal is £84bn/£85bn you'd expect something like £60bn to come back to shareholders. Where I think there is some risk [to that] is if it decides not to return cash but to fund another acquisition. Our view is that they should buy cable assets in Europe, so the size of an acquisition could be large. Vodafone could sit on cash until they are ready to make an acquisition. They need to address their lack of fixed line and cable assets in Europe.
Vodafone will still be a large company. It does make it more of a target but I still think it is unlikely to get bought, particularly if they make another acquisition.
*David Wright, Deutsche Bank
*
We have written several times about Vodafone's need to buy European assets to meet convergent pressures and this was borne out in the recent German transaction. However, we still expect Vodafone to plug other gaps with southern Europe as an obvious region of under-performance. One standout candidate here is Fastweb, currently owned by Swisscom.
*Jerry Dellis, Jefferies
*
We have consistently argued that Vodafone would look to hold back a significant proportion of proceeds in the event of a Verizon Wireless stake disposal. We suspect that initial returns to Vodafone shareholders could be in the range $20bn-30bn (£13bn-19bn) (from $50bn-55bn of cash proceeds, net of tax) plus any Verizon stock consideration that is available for Vodafone to dividend across to its own shareholders.
Vodafone's competitive weakness in fixed broadband has been exposed by rivals starting to bundle fixed and mobile products in some countries. Management has sought to address the issue through acquisitions in Germany and the UK, and organic investments in fixed-line infrastructure elsewhere. Core mobile activities also remain under quite severe pressure. This has perhaps been less debated as the tendency is to attribute operating weakness to cyclical headwinds. But recent quarters have seen Vodafone market share trends weakening in both German and UK mobile.
If Vodafone is serious about stabilising its European mobile core, accelerating investments to create a network advantage that consumers can actually recognise seems to us a pre-requisite.
We do not believe there is material risk of Vodafone embarking on aggressive footprint expansion. But even within the existing footprint, there is plenty of scope for overpayment. Vodafone's Ghana experience is still recent enough to limit emerging market ambitions. But acquisitions in sub-Saharan Africa might still be justified on the basis that they could complement Vodacom operations. In Europe, it seems very unlikely that Vodafone would try to expand into new countries. But there are strategically justifiable targets with existing markets (Fastweb, ONO, 3Italia, Yoigo).
*Simon Weeden, Citigroup
*
A smaller Vodafone post a sale of its stake in Verizon Wireless and capital distribution could become a bid target, a qualification less plausible today due to its large size and the potential for value loss on a forced sale of Verizon Wireless for some bidders. In Europe we see Vodafone as exposed to potential consolidation in some of its largest markets and expect the worst of the regulatory pressure to pass now that the European commission has reportedly dropped the most threatening of its roaming regulations.
Based on prior comments from AT&T management, we believe AT&T is interested in investing in European wireless assets through possible partnerships and outright acquisitions. Vodafone would provide European continental scale in a single-step for AT&T, but we remain cautious on the future benefits to AT&T in such a scenario given that the European telecom market still seems to be managed on a country-by-country basis, cash investments may need to rise to create avenues of future revenue growth, and cash generated from overseas assets may face some hurdles to efficiently be brought back for US investors.
Despite our concerns, we believe AT&T could consider acquiring Vodafone at some point in the future, but believe the transaction between Verizon and Vodafone would need to be completed before AT&T could step into the ring. Reported by guardian.co.uk 7 hours ago.
*Will Draper, Espirito Santo
*
The consensus is that shareholders would get around 70% of the proceeds via a share buyback or special dividend. So if the deal is £84bn/£85bn you'd expect something like £60bn to come back to shareholders. Where I think there is some risk [to that] is if it decides not to return cash but to fund another acquisition. Our view is that they should buy cable assets in Europe, so the size of an acquisition could be large. Vodafone could sit on cash until they are ready to make an acquisition. They need to address their lack of fixed line and cable assets in Europe.
Vodafone will still be a large company. It does make it more of a target but I still think it is unlikely to get bought, particularly if they make another acquisition.
*David Wright, Deutsche Bank
*
We have written several times about Vodafone's need to buy European assets to meet convergent pressures and this was borne out in the recent German transaction. However, we still expect Vodafone to plug other gaps with southern Europe as an obvious region of under-performance. One standout candidate here is Fastweb, currently owned by Swisscom.
*Jerry Dellis, Jefferies
*
We have consistently argued that Vodafone would look to hold back a significant proportion of proceeds in the event of a Verizon Wireless stake disposal. We suspect that initial returns to Vodafone shareholders could be in the range $20bn-30bn (£13bn-19bn) (from $50bn-55bn of cash proceeds, net of tax) plus any Verizon stock consideration that is available for Vodafone to dividend across to its own shareholders.
Vodafone's competitive weakness in fixed broadband has been exposed by rivals starting to bundle fixed and mobile products in some countries. Management has sought to address the issue through acquisitions in Germany and the UK, and organic investments in fixed-line infrastructure elsewhere. Core mobile activities also remain under quite severe pressure. This has perhaps been less debated as the tendency is to attribute operating weakness to cyclical headwinds. But recent quarters have seen Vodafone market share trends weakening in both German and UK mobile.
If Vodafone is serious about stabilising its European mobile core, accelerating investments to create a network advantage that consumers can actually recognise seems to us a pre-requisite.
We do not believe there is material risk of Vodafone embarking on aggressive footprint expansion. But even within the existing footprint, there is plenty of scope for overpayment. Vodafone's Ghana experience is still recent enough to limit emerging market ambitions. But acquisitions in sub-Saharan Africa might still be justified on the basis that they could complement Vodacom operations. In Europe, it seems very unlikely that Vodafone would try to expand into new countries. But there are strategically justifiable targets with existing markets (Fastweb, ONO, 3Italia, Yoigo).
*Simon Weeden, Citigroup
*
A smaller Vodafone post a sale of its stake in Verizon Wireless and capital distribution could become a bid target, a qualification less plausible today due to its large size and the potential for value loss on a forced sale of Verizon Wireless for some bidders. In Europe we see Vodafone as exposed to potential consolidation in some of its largest markets and expect the worst of the regulatory pressure to pass now that the European commission has reportedly dropped the most threatening of its roaming regulations.
Based on prior comments from AT&T management, we believe AT&T is interested in investing in European wireless assets through possible partnerships and outright acquisitions. Vodafone would provide European continental scale in a single-step for AT&T, but we remain cautious on the future benefits to AT&T in such a scenario given that the European telecom market still seems to be managed on a country-by-country basis, cash investments may need to rise to create avenues of future revenue growth, and cash generated from overseas assets may face some hurdles to efficiently be brought back for US investors.
Despite our concerns, we believe AT&T could consider acquiring Vodafone at some point in the future, but believe the transaction between Verizon and Vodafone would need to be completed before AT&T could step into the ring. Reported by guardian.co.uk 7 hours ago.