Vodafone under spotlight as Cevian takes stake

UK telecoms company Vodafone has been targeted by the activist investor Cevian, putting management under pressure to improve its struggling performance, British media reported on Sunday.

The Sweden-based investment firm has built up holdings in the communications giant in recent months, which has seen its share price almost halve in value since 2018. It also holds stakes in insurer Aviva and educational publisher Pearson.

The move comes as rival BT faces pressure from Franco-Israeli tycoon Patrick Drahi who has taken an 18% stake in the group.

Vodafone chief executive Nick Read will now be under further scrutiny. He was forced to take a cut in perks soon after taking over at the company in 2018 to stop an investors’ revolt in 2019.

They were angry after Vodafone said it wasn’t paying a dividend as it racked up massive losses buying 5G spectrum in European auctions. In its interim results in November, Vodafone revealed its debt pile stood at €44.3bn (£37bn).

“Unlike most situations where an activist pops up on the shareholder register, Vodafone already has a plan in place to sharpen the focus of the business," said AJ Bell investment director Russ Mould.

“That has so far included spinning off Vantage Towers, refocusing the portfolio through a range of disposals and mergers, and positioning the company for ever-greater consumption of data via mobile and fixed-line broadband networks. Dividends have also been cut to a more sustainable level."

“However, the reshaping of Vodafone has yet to result in any meaningful re-rating by the market – the shares are no higher now than they were in 1998."

Mould said Vodafone's group structure "still really makes Vodafone look like an investment fund which just owns as collection of telecoms assets".

“Looking at the classic list of activist strategies, Vodafone is the sort of name which might pop up on a hitlist – terrible share price performance, unwieldy group structure and potential for strong cash generation.

“However, its monster debt pile looks to limit the scope for an increased share buyback scheme or higher dividends, at least in the absence of asset sales."