Investors head to the hills as bad news keeps coming
Investors will be looking to see if Vodafone shares continue to slide today [February 20th 2013] after the company’s future performance was questioned on three different fronts. First came the news from rival carrier EE that its pre-tax losses had more than doubled to £249 million in 2012, underlining fears that the mobile phone market was waning.
Despite launching the UK’s first 4G mobile network, its figures suggested that it was failing to win over new customers though chief executive Olaf Swantee denied the launch had been poorly handled.
But he also declined to reveal how many customers are now on 4G, citing commercial confidence while rivals are still bidding in the government’s £3.5 billion auction for new spectrum – with crucial first round winners also announced today [20th February 2013]. (See here).
EE’s poor results had an unsettling effect on other carriers, particularly Vodafone which proved to be one of the biggest fallers yesterday on the FTSE 100, with its shares dropping to 163 pence – 10 pence less than they were a week ago.
But also affecting Vodafone’s price was the news that top City investment guru Neil Woodford had sold his entire Vodafone holdings from the Invesco Perpetual High Income fund that he manages.
Vodafone’s reduced revenue forecast aligned with weakness in its core southern European markets were given as the reason.
If that wasn’t enough bad news, finally came word from US broker Sanford C Bernstein that it was downgrading Vodafone stock to under perform – the equivalent of sell – while also issuing a swinging cut to the company’s target share price, reducing it to just 135 pence.
Vodafone’s European assets, which account for about 40 per cent of the group operating profit, may shrink by 23 per cent in the next three years, Bernstein said.
* Footnote: On a brighter note, however, it was revealed that Vodafone had appointed banks to advise on its proposed acquisition of German cable operator Kabel Deutschland, with Goldman Sachs and UBS to work on the deal.
If the takeover goes ahead it would strengthen the carrier’s presence in one of its biggest markets.
Kabel’s earnings update, to be released this morning, will be pored over by Vodafone before a bid is made.