Dialing For Vodafone

Ever in search of underpriced growth stocks, money manager Larry Keblusek regularly screens some 800 companies, but only 100 to 125 of them end up in his $4.5 billion portfolio. One recent find, a British company whose American depositary receipts (ADRs) trade on the Big Board, "is a real gem," he says, with all the characteristics of a budding growth stock plus--believe it or not--a strong takeover appeal. The company is Vodafone Group, a mobile-communications outfit providing cellular, paging, and mobile radio services.

Trading at 90, Vodafone is "an undervalued play in the huge global cellular-phone business," says Keblusek, director of Northern Trust's Northern Investment Counselors in Chicago. Vodafone's core business, formerly known as Racal Telecom, is operating one of Britain's cellular networks, serving more than 55% of the country's subscribers.

It also has big stakes overseas, including a license to build and operate Australia's third network, a 30% interest in a Hong Kong cellular operator, 16% in a cellular network in Germany, 80% in a Maltese cellular operator, and 18.9% in a Swedish company licensed to operate three networks.

These interests could attract the likes of American Telephone & Telegraph and the Baby Bells. Speculation is that Vodafone is high on their lists of takeover candidates, says Keblusek. Vodafone shares are worth $180 in a buyout. Most U.S. companies in the business are highly leveraged, but Vodafone has little debt. He sees it earning $3.50 in the fiscal year ending Mar. 30, and $4 in fiscal 1995. It earned $3.01 in 1993. Vodafone, he says, "is the best global play in cellulars."

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