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Will Vodafone Make Like a Banana ... and Split?
(28 Jan 2010, BWCS Staff)Pressure is mounting on Vodafone and its CEO, Vittorio Colao, to improve the company's European division. According to reports in today's Financial Times newspaper, Vodafone shareholders are gearing up for a scrap and some investors are even suggesting that the break-up of the UK-based global mobile operator could be on the cards.
The FT claims that shareholders are disappointed that Colao's plans to transform Vodafone's European operations have, so far, met with little success. Some investors are even said to be pressing for a sale of the company's 45% stake in US mobile giant Verizon Wireless. This is seen as a response to the decision by Verizon Communications, the majority owner of Verizon Wireless, to bock dividend payments back in 2005.
Analysed coldly the Colao regime has not been as successful as previous ones have at Vodafone, the FT points out that since he took over in mid-2008, the company's share-price has underperformed compared to its rivals. The further the division goes between the perceived value of the sum parts of Vodafone and the actual share-price value of the whole group, the more likely it is he will face calls for the business to be broken up.
The FT article quotes financial analysts at Bernstein who believe that the Vodafone share-price is around 30% lower than it should be, based on a fair value of the company's controlled assets. However, the paper concedes that most European telcos are in the same boat, with the average discount of share-price compared to total break-up value running at around 25%. The ball is clearly now in Colao's court, and Vodafone watchers expect him to come out fighting and issue a strong defence of why the group should remain united.
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