Jefferies upgrades Vodafone on window of opportunity

The investment bank said the EU mobile sector is benefitting from supportive pricing and the macro economic backdrop.

“Easing macro pressure should translate into less price sensitivity,” the note said.

“Mild price inflation is already evident with competition more focused on product capability (TV/fibre, raising 4G data allowances), less on cutting monthly fees.”

It also said the company’s performance gap against its competitors is also narrowing, and highlighted that while other FTSE companies are finding dividends under pressure, Vodafone’s “covered 5.4% March 17 yield should look attractive”.

However, Jefferies did highlight that the Liberty Global acquisition is still needed to secure the company’s long-term prospects.

“Last summer we took the (then) anti-cons view that VOD is the more likely acquirer for reasons of regulation ('European champions' ambition), capital structure and complexity (VOD/LBTYA: Europe in Charge, More Likely, 29 May 2015).

“VOD-LBTY valuations have narrowed substantially. The sort of take-out offer that LBTY might feasibly accept was value-destructive for VOD s/ holders last summer but could be materially value-accretive (to both sets of s/holders) now.”

Shares in Vodafone dipped to 215.1p at 1036 GMT, down 3.4p (1.56%).