What’s Next For Vodafone Group plc?

Should you sell your Vodafone Group plc (LON:VOD) shares before the Verizon demerger?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.


Telecoms company Vodafone (LSE: VOD) (NASDAQ: VOD.US) was a very good performer in the FTSE 100 last year. Yet early in the year many, including myself, were thinking of selling the company, not buying.

Vodafone is a prime example of a company where strategy has been crucial to the performance of the company, and its share price.

Vodafone’s strategy has been crucial

Early in the year what I saw was a company whose main business was in Europe — a Europe that was in recession after the credit crunch and then the eurozone crisis, where telecoms profits were falling, not rising.

I saw a company that was once seen as a rapidly growing technology company, but which was now turning into a slow-growth, run-of-the-mill utility.

But the company’s chief executive Vittorio Colao had other ideas. He could see that the business was substantially undervalued by the market. It had a huge stake in US telecoms company Verizon Wireless; yet the value of this stake was just not reflected in Vodafone’s share price.

He could see that many areas of the world had rapidly growing telecoms sectors, yet Vodafone was based in Europe, where the telecoms sector was moribund.

He could see that the worlds of telecoms and broadcasting were colliding, and that data, rather than voice, represented the future of the sector.

So Signor Colao promptly sold Vodafone’s stake in Wireless to Verizon Communications, immediately unlocking Vodafone’s hidden value. The share price has promptly rocketed.

He has bought Kabel Deutschland, one of the main pay-tv companies in Germany. I suspect he will buy more broadcasting assets in Europe. This has turned the firm’s European assets from slow-growth to potentially a high-growth business.

He is buying up telecoms assets in emerging markets, particularly India: countries where mobile phone spend is surging, which are on the verge of a smart phone boom. And he is investing in next generation high speed data networks. Overall, the company will invest nearly £20 billion by 2017.

The practicalities of the Verizon demerger

So the company’s transformation is progressing well. But what about the practicalities of the Verizon demerger? Well, on Monday 21 February the current company will be divided between Verizon and Vodafone, so current shareholders will own shares in both Verizon and Vodafone. The shares will commence trading the following Monday. The number of shares you hold in Vodafone will halve, but the share price will remain the same.

Should you sell your Vodafone shares before this point? I think this is a moot point, probably as dependent on whether you can cope with the intricacies of owning US shares as it is on the long-term strategy of both companies.

My own view is that, overall, Vodafone is now fairly valued. The remaining Vodafone shares have strong prospects because of the reasons I have outlined above. And your Verizon shares will be a stake in the US’s leading mobile company, so they would also be a hold.

But, thinking about it, I might just be tempted to bank a quick profit…

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Prabhat owns shares in Vodafone.

More on Investing Articles

Young black man looking at phone while on the London Overground
Investing Articles

This 10.6% yielder beats every dividend share on the FTSE 100. Can it last?

Harvey Jones couldn't resist the double-digit yield on offer from this FTSE 100 stock. Now he'd like to get some…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

With the FTSE 100 flying, I love the look of this company

The FTSE 100 index has been in rally mode over the last few months, but I think one of it's…

Read more »

Investing Articles

17% of my Stocks and Shares ISA is invested in these 2 UK shares

Stephen Wright looks to focus on investments in companies that have strong competitive advantages. And two UK shares stand out…

Read more »

Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA into Lloyds shares

Harvey Jones bought Lloyds shares last year and is kicking himself for failing to buy even more of them. The…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

Apple is still my favourite company in the S&P 500, here’s why

Apple recently unveiled a lot of new software at a developer conference. Here's why the tech giant is still my…

Read more »

Investing Articles

5 great value UK companies I’d buy in a Stocks and Shares ISA and aim to hold for decades 

Harvey Jones is getting to work on his Stocks and Shares ISA. He thinks these five firms have solid income…

Read more »

Value Shares

Are GSK shares a bargain after falling 11%?

GSK shares have taken a hit in recent weeks due to Zantac uncertainty. Here, Edward Sheldon looks at whether they’re…

Read more »

Investing Articles

Nearing £5, could the Rolls-Royce share price hit £6?

The Rolls-Royce share price has soared in the past year. Our writer thinks there could be a strong runway ahead…

Read more »