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Chris Hughes

Activist Tilt at Vodafone Has Plenty Going for It

The U.K. telco is a sprawling conglomerate with poor returns. Sector consolidation offers an opportunity to focus on markets where it leads.

Britain's Phone Companies Prepare Inflation-Busting Price Hikes
Photographer: Jason Alden/Bloomberg

Even considering Cevian Capital AB’s appetite for underachievers, the activist investor’s latest target is ambitious. Vodafone Group Plc is a serial laggard dogged by stubbornly negative sentiment. But there’s a credible path to reversing that — if management is willing to address years of undisciplined expansion. Activist pressure may help ensure that happens. 

On most conventional measures, the U.K. telecoms firm looks undervalued. Strip out its 82% holding in German-listed mobile masts business Vantage Towers AG, and the stock was trading at around four times next year’s expected earnings before interest, tax, depreciation and amortization before Cevian’s interest emerged, according to analysts at Numis Securities. The European sector is valued at about six times.