2019-08-01_Shares_Magazine

BIG BIG NEWSNEWS

01 August 2019 | SHARES | 7

Vodafone shares see

largest ever one-day jump

Spinning off its towers business could prompt investors to reappraise the stock

I

nvestors in mobile network operator Vodafone

(VOD) received some rare good news last

week, sending the shares up over 10% on

Friday (26 Jul) and another 6% on Monday (29 Jul)

to 154p, their best level in more than six months.

ŚŝĞĨĞdžĞĐƵƟǀĞEŝĐŬZĞĂĚ͕ǁŚŽŚĂƐďĞĞŶŝŶ

ƚŚĞũŽďůĞƐƐƚŚĂŶĂLJĞĂƌ͕ŚĂƐƉƌŽƉŽƐĞĚŚŝǀŝŶŐŽī

Vodafone’s European mobile towers interests into

ĂƐĞƉĂƌĂƚĞůĞŐĂůĞŶƟƚLJĐĂůůĞĚ͚dŽǁĞƌŽ͛ĂŶĚ

ƉŽƐƐŝďůLJůŝƐƟŶŐŝƚŽŶƚŚĞ>ŽŶĚŽŶƐƚŽĐŬŵĂƌŬĞƚ

within the next 18 months.

Phone masts are hardly glamorous but they

ŐĞŶĞƌĂƚĞƐŝŐŶŝĮĐĂŶƚĐĂƐŚŇŽǁƐĂŶĚǁŚŝůĞůŝƐƟŶŐ

them on the stock market may sound novel, tower

companies have been popular with European and

US investors for many years.

ŇŽƚĂƟŽŶŽĨdŽǁĞƌŽĐŽƵůĚŶŽƚŽŶůLJďĞƵƐĞĚ

to pay down some of Vodafone’s sizeable debt but

ǀĂůƵĂƟŽŶƐŽĨƵƌŽƉĞĂŶĂŶĚh^ƉĞĞƌƐƐƵŐŐĞƐƚƚŚĂƚŝƚ

could transform the company’s own market value.

^ƉĂŝŶ͛ƐĞůůŶĞdždĞůĞĐŽŵ͕ǁŚŝĐŚŐĞƚƐƚǁŽƚŚŝƌĚƐ

ŽĨŝƚƐƌĞǀĞŶƵĞĨƌŽŵƌĞŶƟŶŐŝƚƐκρ͕ϬϬϬƚŽǁĞƌƐƚŽ

mobile phone networks, has an enterprise value

;sͿ͕ŽƌŵĂƌŬĞƚĐĂƉŝƚĂůŝƐĂƟŽŶƉůƵƐĚĞďƚ͕ŽĨΦϭκ͘ϭďŶ͘

ŶĂůLJƐƚƐĨŽƌĞĐĂƐƚĞůůŶĞdž͛ƐĞĂƌŶŝŶŐƐďĞĨŽƌĞ

ŝŶƚĞƌĞƐƚ͕ƚĂdž͕ĚĞƉƌĞĐŝĂƟŽŶĂŶĚĂŵŽƌƟƐĂƟŽŶ

;/dͿǁŝůůƌĞĂĐŚΦςκϬŵƚŚŝƐLJĞĂƌ͕ǁŚŝĐŚ

ŵĞĂŶƐŝŶǀĞƐƚŽƌƐĂƌĞƉĂLJŝŶŐĂŵƵůƟƉůĞŽĨϮϮƟŵĞƐ

EV-to-EBITDA in order to own the shares.

sŽĚĂĨŽŶĞ͛ƐdŽǁĞƌŽŽǁŶƐƵƌŽƉĞ͛ƐůĂƌŐĞƐƚ

ƉŽƌƞŽůŝŽŽĨςϭ͕ϳϬϬƚŽǁĞƌƐĂĐƌŽƐƐϭϬŵĂƌŬĞƚƐ

ĂŶĚĂĐĐŽƌĚŝŶŐƚŽZĞĂĚŝƐĐĂƉĂďůĞŽĨŐĞŶĞƌĂƟŶŐ

͚ƉŽƚĞŶƟĂů͛ƉƌŽƉŽƌƟŽŶĂƚĞ/dŽĨΦεϬϬŵ

per year.

WƵƫŶŐĂŵƵůƟƉůĞŽĨϮϮͲƟŵĞƐŽŶdŽǁĞƌŽ͛Ɛ

EBITDA would value the towers business alone at

ĂůŵŽƐƚΦϮϬďŶŽƌάϭΘďŶĂŐĂŝŶƐƚsŽĚĂĨŽŶĞ͛ƐŵĂƌŬĞƚ

value of £35bn and EV of £68bn the day before the

announcement.

Vodafone also announced last Friday that it had

agreed to merge its Italian tower infrastructure

with Telecom Italia in a deal which values the unit

ĂƚĂŶsͲƚŽͲ/dŵƵůƟƉůĞŽĨϮκͲƟŵĞƐ͘

&ŝŶĂůůLJ͕ƌŽǁŶĂƐƚůĞ/ŶƚĞƌŶĂƟŽŶĂů͕ǁŚŝĐŚ

ŽǁŶƐĂƉŽƌƞŽůŝŽŽĨh^ŵŽďŝůĞƉŚŽŶĞƚŽǁĞƌƐ͕ŝƐ

ǀĂůƵĞĚĂƚϮϮƟŵĞƐsͲƚŽͲ/dƐŽĂǀĂůƵĂƟŽŶ

ŽĨďĞƚǁĞĞŶϮϬĂŶĚϮρͲƟŵĞƐĨŽƌdŽǁĞƌŽǁŽƵůĚ

seem reasonable.

/ĨZĞĂĚĐĂŶŚŝǀĞŽīƚŚĞƚŽǁĞƌƐďƵƐŝŶĞƐƐǁŝƚŚ

a big chunk of debt – its listed peers carry debt

ĞƋƵŝǀĂůĞŶƚƚŽďĞƚǁĞĞŶκϬйĂŶĚϳρйŽĨƚŚĞŝƌ

market value – it could go some way to reducing

Vodafone’s parent company indebtedness.

We should stress that none of the above is set in

stone other than the plan to separate the towers

unit. More detail will doubtless emerge at the

ĂŶĂůLJƐƚŵĞĞƟŶŐŽŶϭεƵŐƵƐƚ͘

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