Is Vodafone in Recovery in the European Market?
According to Questor, it appears as if Vodafone is loving a recovery in terms of core European markets and cash flow; which should significantly improve sometime next year when a major investment plan completes.
The loss of such a vital aspect of Vodafone’s business was expected to require a period of regrowth. In fact, the market value of Vodafone nearly halved from approximately £115bn last year to roughly £60bn today, after it sold its 45pc stake to the US mobile operator, Verizon Wireless – with a hefty chunk of the total sale proceeds returned to the shareholders.
What’s more interesting is that for long-term investors, Vodafone remained in a position of comfort at a point when many European rival companies were suffering from increased levels of debt, falling revenue and tumbling profits. Vodafone was even able to strategically add assets across Europe in a buyer’s market while additionally spending billions on its own infrastructure. It is beginning to show progress with organic service revenue, increasing of 1pc in the first half, to £18.4bn. By March next year, Vodafone is anticipated to have spent £19bn, (almost 1/3 of its current market capital), improving its infrastructure in order to cope with faster, larger volumes of data, of which is driven by people’s preferences to watch bulky content (like TV shows) on their mobiles. The latest 4G technology allows this to happen.
Analysts are seeking to determine if there are clear-cut indications in these numbers of Vodafone’s position in the market, and what will drive the company’s valuation over the next five or ten years. While in the UK, Vodafone has been left in the dust, by rivals EE and O2, but it is still catching up. They recently announced that its network can now provide the latest 4G service to 82pc of the UK market and that its current 4G customers reached 5.3m by the end of September, up 76pc from 3m in May; almost five times the 1.1m at the same stage the previous year. Vodafone’s 4G coverage is at present 80pc across Europe, with 29.9m customers signed up for their service and the amount of data these customers are using has in turn grown by 75pc during the first half.
The risks to investors during this period of investment have of course increased; with a net debt spanning £28.9m, up from £21.8bn a year ago. Vodafone’s net assets have dropped from £66bn to £63bn at the end of September (that’s 248 per share).
There are some significant signposts, however, of which are anticipated to be reached within the next six months that are supportive for the shares. The capital spending under the £19bn “Project Spring” ends in March 2016, and cash generation should in turn markedly advance within the upcoming financial year.
The rise of Vodafone’s 4G customers should additionally continue throughout the second half as well; particularly in the way of dividend payments, which offer a prospective yield of 5.3pc. We are not Vodafone, official freephone contact information can be found on their official website. It certainly appears that Vodafone still remains a target for take-over for a US group due to its exposure in Europe, especially as shares have sold off during the past six months and at the rate they are presently bought.