Analyst confidence in Vodafone drops

Fears that move to data tariffs won’t yeild expected revenue increases

It appears that market confidence in world leading MNO [Mobile Network Operator], Vodafone has declined give that of the 34 analysts publishing research on the stock, only a third are buyers, the lowest ratio on record – according to a report in the FT. It seems the latest blow was when Merrill Lynch which cut Vodafone off its ‘buy’ list on yesterday. Reasons for this lack of confidence seem to centre on the fact that hope for gains from the switch to concentration on high data tariffs away from voice don’t appear to be paying off. Trading in key markets such as Germany and Italy have shown few signs of improvement. Meanwhile the payback from longer-term investments such as Project Spring, its £19 billion should help revive revenue growth but only from 2017 onwards.

Significantly, just like GoMo News, Merrill Lynch seems doubtful that MNOs obsession with fourplay [mobile, fixed line broadband, voice and TV] will actually pay off.

The broker suggests that market share gains cannot be assumed as competitors will be probably respond by making like-for-like investments, said Merrill.

In the six major European mobile markets where Vodafone operates there is little correlation between data consumption and ARPU (average revenue per user), suggesting the industry’s reliance on pushing data may have been misjudged, the broker argued.

Worse still, while the markets’ enthusiasm for MNO consolidation continues (which Sprint tipped to acquire T-Mobile USA, AT&T looks like it has lost interest in Vodafone and instead has turned its sights on US satellite broadcaster – DirecTV.

GoMo News reckons that MNOs need to go back to offering services to their existing subscriber bases. They could take the impetus away from OTT players by painting RCS-e based messaging services as ‘social texting’.

Thus combining the two facilities which subscribers like best – SMS and IM [Instant Messaging].

Today [June 20th 2014, Vodafone’s shares were trading at 194.60 – down 0.25 or 0.13 per cent and overall change of 40 per cent in last 12 months.

About Dave Evans

Dave Evans is a long established commentator on both the IT and cellular industries. His current focus is on share price trends within the sector. You can email him here
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