(MENAFN- Trend News Agency)
Shares in Vodafone edged higher on Monday as a surprise $4.4
billion investment from the UAE-based telecoms company e& provided
a much needed but possibly short-term boost to the British firm's
CEO Nick Read, Trend reports with reference to Reuters .
The company previously known as Etisalat said on Saturday it had
become the largest shareholder in Vodafone with a 9.8% stake,
attracted to its management, its efforts to unlock value and a
diversified currency base.
It ruled out exerting control or launching a full takeover.
Analysts were divided however over the group's long-term plan,
after activist investor Cevian and other long-standing shareholders
called on Vodafone to simplify its portfolio, repair markets
through consolidation and boost returns.
While analysts at JPMorgan said e& could become more activist
over time, possibly in conjunction with Cevian, Credit Suisse and
Jefferies said the investment could give Read more breathing room
to invest in assets and withstand pressure to sell off operations
'Indeed it could even allow Vodafone to make investment
decisions that come at the expense of short term Free Cash Flow
generation now that it has an industrial backer with a long term
time horizon,' Credit Suisse said.
Jefferies said the presence of e& on the shareholder register
could counteract the activist demands, and enable Vodafone to reset
consensus demands, knowing that e& could increase its holding and
prop up the shares.
Shares in Vodafone were up around 3% in morning trading on
Monday. However they remain around 25% below the level when Read
moved from the finance director role to the top job of CEO in
October 2018. read more
Shares in e& were up 6.3%.
Vodafone, with operations across Europe and Africa, said it
looked forward to building a long-term relationship with Etisalat
and noted that it had continued to make good progress with its
long-term strategic plans.
E&, or Etisalat, began life in the UAE but has since
expanded into 15 other markets across the Middle East, Asia and
Africa. Despite having lower revenues than Vodafone it has higher
margins and a market cap of $74.5 billion, almost double the
British company. It also has firepower for more deals.
Vodafone, with 66.3 million mobile contract customers in Europe
and 188 million in Africa, said earlier this year it would pursue
mergers in multiple European markets, saying it believed regulators
would be more accommodating as they realised the value of network
investment during the pandemic.
Since then it has rejected an approach for the group's Italian
assets and missed out on a deal between rivals in Spain.
It reports full-year results on Tuesday.
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