Experts believe that recent activity at Vodafone (LSE: VOD) (NASDAQ: VOD.US) will cause a domino effect and hasten movement elsewhere in the company’s strategy.
Of course, the latter of which is the ongoing discussions with Verizon (NYSE: VZ.US) over their joint-venture Verizon Wireless, of which Vodafone holds a 45% stake, while the “recent activity” I refer to is the impending takeover of Kabel Deutschland for €7.7bn.
Following months of rumours, Vodafone finally agreed a deal for the German cable operator earlier this week, despite facing a competing bid from US rival Liberty Global, marking the British telecoms company’s first move into consumer broadband and television.
But Deutsche Bank believes that once the deal is fully completed, Vodafone would be more willing to discuss the practicalities of selling its interest in Verizon Wireless, in a move that could land them $130bn. Analysts there have upgraded Vodafone to a ‘buy’ signal, setting a target price of 217p — currently, it trades around 187p, on a yield in excess of 5%.
Their reasons include the debt taken on by Vodafone following the acquisition of Kabel Deutschland, and the cash from Wireless would “reduce debt and fund further deals”. The prospect of other takeovers is seen by many as highly likely, as chief executive Vittorio Colao starts to shift the company’s focus towards becoming a ‘one-stop shop’ encompassing mobile, broadband and television.
Finally, the analysts at Deutsche Bank believe that the US wireless market is getting more competitive, after years of Verizon dominating alongside AT&T. Rivals like Sprint and T-Mobile are stepping up a gear, so perhaps Vodafone’s stake in Wireless is currently valued at its highest price — suddenly, cashing in doesn’t seem like such a bad idea after all…
But, of course, that’s just one point of view. Whether you decide to buy, hold or sell is up to you — just ensure that you research the stock thoroughly, as well as weigh up possible scenarios and outcomes like the ones detailed here.
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> Sam owns shares in Vodafone. The Motley Fool has recommended shares in Vodafone.
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