VOD - Vodafone

[wisborough]

Great reminder of what a totally catastrophic company Vodafone is  - terrible

operators and  appalling capital allocators.  As Japan waits for the SoftBank wireless IPO of $90bn - this was the same business that the idiot Arun Sarin ( ex VOD CEO) sold to Masa in 2006 for £8.9bn ( or about $16bn at the time )

 

https://www.google.co.uk/amp/s/www.bloomberg.com/amp/news/articles/2018-09-06/softbank-is-said-to-seek-loans-from-banks-pitching-for-big-ipo

 

Back in 2006

 

https://www.zdnet.com/article/update-vodafone-sells-japanese-arm-for-8-9bn/

 

I am quite sure that the annual FCF at SoftBank wireless is larger than that of the entire Vodafone group today .  Read the BS that came out of Arun Sarin back then

 

Vodafone CEO Arun Sarin said in a statement: "In the case of Japan, we have been making progress on the turnaround in recent months. However given the relative competitive position of the business, the reduced prospects for superior long term returns and a good offer from Softbank, the board took the decision to sell." 

 

Just one of many appalling decisions by this company .

 

 

 

[peterHK]

This is a close the discount company, not a compounder.

 

The thesis is that they only need to stabilize the business, which should happen as they move to converged services which has lower churn. That, along with implementing AI in a bunch of places such as call centers (which is becoming common in the industry, so VOD is not being pioneering here really), should lead to higher margins.

 

Those higher margins plus (one hopes) improved FCF from the liberty deal means the dividend is covered. The dividend being covered in a sustainable manner removes an overhang that's been on VOD's stock for years, and should see the shares normalize.

 

If all that happens, I can see a way to get 15% IRR's over the next 3 years from here.

 

I view it as a higher risk opportunity due to the leverage, management shakeup, and the thesis hinging on operations going well which has historically not been a strong suit of VOD.

 

 

[wisborough]

Levering up to make an acquisition to pay the dividend is the road to ruin.