One Reason Why I Would Buy Vodafone Group plc Today

Today I am looking at why I consider Vodafone (LSE: VOD) (NASDAQ: VOD.US) to be a terrific growth pick.

Acquisition strategy to deliver stunning earnings expansion

Vodafone’s share price has endured significant pressure in recent months, as eroding speculation over a potential takeover — allied with continued revenues pressure in key European markets — has weighed on investor enthusiasm for the stock. Indeed, the mobile operator has fallen almost a quarter from March’s record high above 252p per share.

However, in my opinion Vodafone’s aggressive asset purchase strategy in red-hot product areas and geographies looks set to drive Vodafoneearnings sky high in coming years, a promising omen for resurgent share price growth.

The telecoms giant announced just this week its intention to purchase Italian telematics specialists Cobra Automotive Technologies for £115m. The business provides manufacturers, dealerships and private customers with the hardware necessary to track vehicles and assess driver behaviour for insurance purposes, and has operations across Europe, South America and Asia.

Vodafone said that the move will allow it “to expand its machine-to-machine (M2M) capability beyond connectivity” and will enable it “to provide a more comprehensive range of end-to-end services to automotive customers.” M2M is considered a hot growth area, particularly in cars where applications from music and video streaming, satellite navigation and anti-theft software all feature highly in the next generation of people-movers.

Vodafone has not been shy in entering new spheres of operation in response to flat-lining mobile services turnover, at least in traditional markets. The company entered the triple-services entertainment sector, covering the broadband, telephone and television markets, through the purchase of Germany’s largest cable operator Kabel Deutschland for €7.7bn last year.

And the business boosted its exposure to this segment in March by purchasing Spain’s Ono for €7.2bn. Not only is the bundled-services sector extremely lucrative in its own right, but also provides Vodafone with significant cross-selling opportunities to bolster its flagging European mobile services business.

Still, Vodafone is still betting big on rocketing mobile off-take in critical emerging markets, and in April acquired the total holdings of Vodafone India for £1bn. India is viewed as a key Asian battleground in future years, with tech firms and telecoms providers all ratcheting up their operations in the country.

Vodafone has long been a terrific cash-generator, and boasted gargantuan free cash flow of £4.4bn during fiscal 2014. Backed by this formidable financial arsenal, I expect Vodafone to continue building its exposure to the next wave of exciting product and service areas to blast earnings skywards.

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Royston does not own shares in Vodafone.