big maneuvers continue around Vodafone

Vodafone alone illustrates the difficulties of the telecommunications sector in Europe. In five years, the title of British mobile giant has lost almost half of its market value. Like all other major operators on the Old Continent, Vodafone is the target of a market riot. Many are skeptical of its massive investments in fiber, 4G and 5G, while its margins are suffering from the ultra-competition that Brussels encourages to keep prices low for consumers in its core markets. This is especially true for the UK, Italy and Spain. First of all, some investors are criticizing Vodafone staff for missing out or missing out on certain consolidation opportunities in these key markets.

It is in this electrical context that Emirati telecommunications giant e& announced last Friday that it was acquiring at least 9.8% of the UK group for $4.4 billion. The investment is significant: according to Bloomberg, e&, the group, controlled by the rich oil state, thus becomes Vodafone’s largest shareholder, well ahead of BlackRock (which owns 3.5%), Vanguard (3%) and HSBC (1.9%). . E& ensures that this movement has only one goal: to win “significant exposure to a global leader in connectivity and digital services”, having no intention, at least for the moment, of filing a takeover bid. The Emirati Group claims to support Vodafone’s business strategy, including its board and management.

Towards a merger with Three in the UK?

Markets welcome the maneuver. Vodafone shares rose 2.80% on the London Stock Exchange on Monday. As if investors saw this arrival as a sign that everything will soon and radically change … I must say that now Vodafone is the object of criticism and strong pressure in this direction. Cevian Capital, the largest activist fund in Europe, has been urging management for months to simplify its operations and do everything to strengthen its position in its core markets.

Last week Financial Times revealed that Vodafone is in talks with rival Three UK, owned by Hong Kong-based CK Hutchinson, to merge their UK operations. This alliance between Channel Numbers 3 and 4, in particular, will greatly reduce competition and possibly push prices up a bit. But such an operation will require the approval of the antitrust authorities. What is never easy: In 2016, the European Commission blocked deal between O2 and Three, believing that their union would increase competition and harm in the end consumers. According to the British economic daily, Vodafone hopes to win the timpani this time around. How? Letting the authorities know about the massive investment in networks that the sector is now facing.

Towards consolidation in Spain

At the same time, Vodafone could benefit from a possible improvement in the Spanish market. In this country, where a price war has been raging for many years, its rivals Orange and MasMovil are about to get married. Today, in exclusive talks, the two operators hope to achieve their goals and produce a new leader capable of playing elbows with incumbent Telefonica. While Vodafone’s shareholders would certainly prefer Vodafone to be part of the consolidation process, the group could nonetheless benefit from reduced competition in the long run.

Finally, in Italy there is still work to be done. Here again, Vodafone’s results suffer from strong competition. This became particularly strong with the arrival of Iliad Italia, operator of Xavier Niel, in the spring of 2018. After cutting prices, the latter has since settled into the mobile market and recently launched on the fixed internet. For several months now, there have been rumors and attempts at consolidation in Italy. At the beginning of the year, Vodafone and Iliad successfully worked on a merger project in this country. Xavier Niel’s group even made an offer of 11.25 billion euros for the activities of its competitor in Italy. But Vodafone rejected it, believing that it “not in the interests of its shareholders”. However, “no” is never, especially in the current context, definitive.