the times | Thursday February 3 2022 2GM 37
Business
Vodafone seeks
better numbers
S
ome industries operate on
speed dial. Not telecoms.
Who goes into that business
to get things done “at pace”?
Nick Read, the Vodafone
boss, has just rung up the phrase
again, extra keen to hurry things up
now that activist investor Cevian is
on the register (report, page 38). But
how zippy can he really be?
He joined Voda in 2001, a year
after its £4-plus share price peak,
taking charge in October 2018. So
he’s seen first hand the slow-burn
destruction of value in this “capital-
intensive sector”. Don’t just blame
the companies, either. Government
have milked them via pricey
spectrum auctions, while regulators
have blocked cost-cutting mergers.
Keen to impress, Read’s third-
quarter update was a fair effort,
even if Voda’s main German market
was a bit mixed. Service revenue
growth was an above-forecast
2.7 per cent, Africa’s growing nicely
and Voda’s on track for full-year
underlying earnings of at least
€15.2 billion. That hints at higher
returns. But there’s no quick route
to beating Voda’s 7 per cent cost of
capital. At the half-year, post-tax
return on capital was 4.3 per cent.
It helps explain why the shares,
up 3 per cent yesterday, stand at
132¼p, valuing Voda at £35.8 billion
— below the 160p where Read took
charge. And however fast he wants
to go, much depends on
governments and regulators.
Voda, he says, is in talks with
“multiple parties in multiple
markets”, looking for the “in-market
consolidation” he’s been after since
taking the helm. The priorities just
now? Spain, Italy, Portugal and the
UK. Indeed, Berenberg analysts
reckon the key reason for the rising
shares was an El Confidencial news
story suggesting that MasMovil had
approached Voda “about buying its
Spanish operations” — valued by
Berenberg at €4.9 billion.
Read admits that Spain, alongside
Romania, are “two “markets that are
struggling”. But any Iberian tie-up
needs a regulatory nod. Ditto other
mooted Voda deals: merging its
Italian wing with local outfit Iliad;
or crunching together its UK mobile
unit with Hutchison’s Three. That
would see UK mobile network
owners, also including O2 and BT’s
EE, shrink from four to three. Yes,
Read’s right there are also rivals that
don’t own a network — Sky, Tesco
and TalkTalk, say. But will
regulators really sacrifice consumer
choice to boost Voda’s returns?
Read’s hopeful, believing Covid
has changed the “social contract”
with governments and regulators.
As he puts it: “Governments are
calling me, saying we want more
investment. But we can only do that
if the returns are above our WACC
[weighted average cost of capital]”.
He’s targeting “EU recovery funding
opportunities”: a €750 billion pot,
some of which he could use to
digitise health services or schools.
On top, he plans to build on his
key strategic move to date: spinning
off the mobile masts as Frankfurt-
listed Vantage Towers, valued at
€15 billion. Read wants to merge
Vantage with the rival businesses of
Deutsche Telekom or Orange and
sell down some of Voda’s 82 per centstake. So, in theory, he has plenty of
options to simplify Voda, spread
capex risk and raise returns, not
least with Cevian giving him a prod.
And Goldman Sachs and Numis
both have target prices of 180p.
Even so, Read’s got his work cut out
to ring up a big improvement fast.Playtech deal folds
P
roof there really are certainties
in gambling. Bang goes the
£2.1 billion recommended
takeover of Playtech, with 43.9 per
cent of voting shareholders
snubbing the 680p-a-share offer
from Australian slot machine outfit
Aristocrat. And who’s surprised
about that? No one. It’s been on the
cards ever since a bunch of Hong
Kong-based investors started buying
in above the bid price, some paying
as much as 740p. They’ve got 27 per
cent between them, while refusing
to “engage” with the board or
bidder, as Aristocrat put it (report,
page 40). More fool the Aussies for
not buying shares on day one.
Still, on an 81.7 per cent turnout,
they couldn’t have been the only
investors who opposed the bid. And
technically, under Takeover Panel
rules, it’s irrelevant that they might
have acted in concert: that only
counts if it can be proved that
parties working together hold more
than the 30 per cent that would
trigger a mandatory bid. Besides,
56.1 per cent in favour is hardly a
resounding vote for Aristocrat’s
offer. It always looked low-ball, as
pointed out here when it was tabled
last October — even if Playtech
chairman Brian Mattingley had no
option but to put a bid at a 58.4 per
cent premium to investors.
His options now? Well, with the
shares at 585p, he says: “We don’t
want to break up the company.” But
he’s got “alternative proposals” for
bits of the business: selling Italian
consumer wing Snaitech to
Ladbrokes-owner Entain, say, or the
business-to-business operations to
Aristocrat. Such disposals would
only need majority investor
approval. But that’s no slam dunk,
not least with the Hong Kong
investors said to like the cover that
comes with having Playtech’s small,
unregulated Asian business part of a
UK listed group. There are plenty of
hands left in this card game.Ocado picks up
I
magine all the robots, living life
in peace. That’s hard to do with
Ocado’s lot, what with their
arsonist tendencies. Still, Credit
Suisse analysts are prepared to take
the risk. No sooner did they hear
chief executive Tim Steiner droning
on about his “Ocado Re:imagined”
innovations than they’ve delivered a
“double upgrade”: a leap from
“underperform” to “outperform”,
with a £17.50 price target. It lifted
the shares 5.7 per cent to £15.13.
Yes, the shares have been bombed
out. And Steiner is chuffed with his
new 600 Series of “lighter” robots,
with automated arms. Just don’t let
them anywhere near a real lighter.[email protected]business commentary Alistair Osborne
down by 18.3 per cent, or $34.82, to
$156.80 in late trading, giving it a
market value of about $37 billion.
The platform has invested more than
$1 billion in its podcasting business, led
by exclusive shows such as The Joe
Rogan Experience. But the podcast star
has drawn condemnation after his
show aired controversial views around
Covid, drawing protests from artists
including Neil Young and Joni Mitchell.
Spotify was launched in 2008 by
Daniel Ek, 38, and Martin Lorentzon,
- The service can draw on a library of
more than 70 million songs and 3.2 mil-
lion podcasts. Spotify said that pod-
casts’ share of overall consumption
hours on its platform had reached an
all-time high. Premium subscribers,
who account for most of the company’s
revenue, rose to 180 million. Revenue
from users who hear advertisements
rose by 40 per cent to €394 million, or
15 per cent of total revenue.
Richard Greenfield at LightShed
Partners, said: “Investors largely
ignored Spotify’s advertising business
during its first few years as a public
company. As it moved from a music
platform to a [wider] audio platform, it
has unlocked the potential for a robust
advertising business that is now too
large for investors to ignore.”
You’re hired: Amazon will
take on 1,500 apprentices
Amazon is set to create 1,500 appren-
ticeships in Britain this year. The
expansion of the giant online retailer’s
programme includes more than 200
degree-level apprenticeships and about
40 different schemes, from engineering
to health, safety and environment
technicians.
Thirteen new schemes for 2022
include publishing, retailing, marketing
and a programme focused on environ-
mental, social and corporate govern-
ance.
Amazon also said yesterday that it
had increased its permanent UK work-
force by 25,000 in 2021 and now had
more than 70,000 employees in the
country.
The $1.5 trillion technology group
has interests spanning groceries, inter-
net advertising and video and music
streaming. Through its Amazon Web
Services division, the Seattle-based
business is also the world’s biggest
cloud computing company.
John Boumphrey, Amazon UK’smanager, said: “We are proud to have
created so many new permanent jobs
across the UK in the last year and the
1,500 apprenticeships we’re creating
this year will help even more people to
get the skills that are in demand in
today’s labour market.
“We want to be the employer that
helps people take their careers to the
next level, whether you’re just starting
your first job or making a career
change, in every community that we
serve across the UK.”
Kwasi Kwarteng, the business secre-
tary, said: “Amazon’s announcement is
testament to the strength of the British
economy, with GDP back at pre-pan-
demic levels, employee numbers at
record highs and unemployment fall-
ing. With the vast majority of Amazon’s
workforce located outside of London
and the southeast, these additional
25,000 jobs highlight the success of our
Plan for Jobs in helping to ensure
greater opportunities across the
country.”that also excludes alcohol and tobacco
products slowed to 2.3 per cent from
2.6 per cent. Both figures were well
above expectations.
The ECB has insisted previously that
a rate increase is “very unlikely” this
year, but money markets indicate that
investors expect a rise of 0.3 percentage
points by the end of December.
“Euro area headline inflation is on
track to exceed ECB staff projections by
more than 100 basis points in the first
quarter” Frederik Ducrozet, a strategist
at Pictet Wealth Management, said.
According to trading on money
markets, investors have pulled forward
their expectations for a rate rise, with
the ECB predicted to raise the deposit
rate to -0.25 per cent — from -0.5 per
cent — in December.Lagarde flies
her own course
on inflation
Behind the story
C
hristine Lagarde has her
doveish line on inflation
and there’s no reason to
think that the European
Central Bank’s president
will deviate from it any time soon
(Simon Duke writes). She is among a
group of central bankers who believe
that the pressures eating into living
standards will prove “transitory”.
That’s in contrast to peers such as
Jerome Powell at the US Federal
Reserve, who fear that inflation
could become entrenched.
The eurozone’s central bank thinks
that wage growth (a driver of long-
term inflation) is lacklustre and that
the threat of rising prices will recede
as the impact of higher energy and
food bills fades.
More important still is the strength
of the eurozone recovery, which has
lagged behind that of the United
States. “The cycle of economic
recovery in the US is ahead of that in
Europe,” Lagarde said last month,
“so we have every reason not to act
as quickly or as ruthlessly as one
might imagine with the Fed.”
Her stance looks harder to justify
with inflation at 5 per cent. It’s not as
if the eurozone economy is on its
knees: it returned to pandemic levels
in the winter after growing by 5.2 per
cent last year. True, that’s shy of
America’s 5.7 per cent, but Capital
Economics expects 3.5 per cent
expansion in the eurozone this year
compared with 2.7 per cent in the US.
So why the different approaches?
America suffered a smaller hit to
output during the early phase of the
pandemic and staged a stronger
recovery. Much of Washington’s
emergency spending went as
stimulus cheques to households,
rather than on furlough schemes, as
in Europe. In the US, millions of
people dropped out of the workforce,
reducing the overall pool of labour;
Europe’s labour market remained
stable as companies were paid to
keep staff on the payroll. Eurozone
businesses also have much greater
spare capacity, so rising demand
won’t translate into higher prices as
readily as it will in America.Electric lorries power down a German
autobahn. Christine Lagarde, left, wants the
eurozone recovery to maintain momentum
as she juggles inflation and interest rates