17th October - Vodafone Shares
@ £1.60 per share
Vodafone Group, a British multinational telecommunications conglomerate, has a prime listing on the London Stock Exchange and a secondary listing on NASDAQ. Vodafone shares is a constituent of the FTSE 100 Index with market capitalisation of approximately £52.5 billion as of February 2016, which is the eighth- largest of any company listed on London Stock Exchange.
Recently, Vodafone shares is severely undervalued but here are 7 reasons why you should still consider it as a safe investment.
1- 5G Expansion is the game changer
Vodafone has a total of 62 5G supported towns and cities across Europe. Recently, it had switched on 5G in seven new locations including Berlin, Bremen, Dresden, Darmstadt, Leipzig, Duisburg and Frankfurt.
The continued 5G expansion by Vodafone in Europe makes it the UK network with the most 5G locations on offer to its customers. Along with the new locations in Germany, Vodafone UK customers can already access 5G roaming in Spain and Italy. Along with this, it offers 4G roaming in 156 locations, which is more than all other UK networks. 5G creates tremendous opportunity for numerous industries such as Manufacturing, Agriculture, Healthcare, Transportation, entertainment etc.
Major 5G network deployments are expected by 2020, and a projected 4.1B IoT cellular connections will use 5G worldwide by 2024.
2- Member of 5GAA backing C-V2X in self-driving cars
Vodafone Group is the first operator to join the recently launched 5G Automotive Association (5GAA), a consortium backing C-V2X. It had eight founding members when it began in 2017. Now it has 120 members including auto makers, tech companies etc. and Vodafone is now its platinum member.
C-V2X, a communications technology using 5G networks, will allow self-driving vehicles to communicate wirelessly with each other, with traffic signals and with other roadside gear. Cars today already broadcast their location, speed and direction with 4G networks but with this technology, they will be able to negotiate taking turns at stop signs, merging into lanes and harmonising a trip with greenlights.
Vodafone has already started testing C-V2X, which includes LTE-V2X. Vodafone provides more connected car services, for more vehicle models and in more countries, than any other company. It completed an initial validation of LTE-V2X on a private test track in the U.K. and further plans to trial it in Germany.
3- Vodafone- moving into broadband market
Vodafone has returned to the broadband market with the launch of Vodafone Connect, a new internet and home phone service, offering 17Mbps speeds as part of a basic package, or 76Mbps fibre in its top-tier plan along with amazing discount offers for the customers.
Vodafone is chasing a fixed broadband capability as well as 5G and calling it ‘Vodafone Together’ where they are offering a joint ‘unlimited’ deal for both home broadband and mobile data with no extra charge for 5G and one charge for both services.
Vodafone is not just giving tough time to competitors when it comes to pricing, the firm also hopes to win customers with a unique Connect app offering. Available on iOS and Android, Vodafone's companion app lets broadband customers control their Wi-Fi from a smartphone.
4-Brave dividend cuts allowing more re-investment for future sustainability
After the acquisition of Liberty Global’s operations in Germany and Eastern Europe last year, and attainment of 5G spectrum, question arose whether, Vodafone`s cash flows and balance sheet would be strong enough to maintain a €4bn-a-year pay-out to shareholders.
Over the last year, the market was certain that the dividend was unsustainable. The share price declined relentlessly, pushing the yield up towards double-digits. The day before its annual results, its shares closed at 131.78p.
The following day, it announced it would be rebasing the dividend to €0.09 (7.8p), a 40% cut. The shares fell 3.7% on the day giving a forward yield of 6.1% at a price of 126.84p. I believe is was the right thing to do, even though it abolished the company’s 20-year history of dividend upsurges.
5- Severely undervalued and only way is upwards
Over the past 12 months, Vodafone share price has been a pretty bad investment. Since the beginning of September 2018, the stock has underperformed the FTSE 100 by around 5% and over the past three years, it’s underperformed by more than 12% but under a new CEO, the company is entering into a larger number of partnerships which could reinforce its position in a number of growth markets. And while this may be costly, it could catalyse the company’s long-term growth rate.
The stock appears to offer good value for money due to its dividend yield even after rebasing, it is more than twice that of the FTSE 100, and it could offer recovery potential over the long run. While it has disappointed in the past, its risk/reward ratio is becoming increasingly encouraging as the share price in August 2019 was 149p and has gained over 20% since a multi-year low of 123p towards the end of May.
6- Diversity of operations
Vodafone is ranked 4th among the mobile operator groups globally because of approx. more than 313 million mobile customers. Not only this, it operates networks in 25 countries and has partner networks in further 47 countries. Its Vodafone Global Enterprise division provides telecommunications and IT services to corporate clients in 150 countries.
7- Long term planning for growth
On 26 July, there was a positive news by Vodafone regarding a plan to create Europe’s largest tower company. This news sent the shares over 10% higher on that day. Moreover, Vodafone intends to legally separate its portfolio of around 61,700 towers across 10 countries into a new company (TowerCo) which will be operational by May 2020.
Preparations are under way to monetise a substantial proportion of TowerCo over the next 18 months which may include an IPO or disposal of a minority stake in TowerCo, as well as potential disposals of minority or majority stakes at an individual country level. In addition to this, Vodafone acquired Liberty Global’s assets which has provided it with the position of Europe’s leading converged operator, with 54m cable and fibre households ‘on-net’ and a total next-generation network reach of 124m homes and businesses.
This €18.4bn acquisition of Liberty Global‘s operations in Germany, the Czech Republic, Hungary, and Romania, the proceeds from the monetisation of TowerCo and the rebased dividend, will put Vodafone on a stronger financial footing. For its financial year ending March 2020, there is a forecasting of 77% rise in earnings per share to 9.3 eurocents (7.75p at current exchange rates) and earnings growth in excess of 20% for fiscal 2021.