Will Vodafone Restructure As Abu Dhabi Buys 9.8%?

Vodafone (LON: VOD) shares are up some 4% this morning as the news spreads that Emirates Telecommunications Group – an Abu Dhabi state-controlled group known as Etisalat – has picked up 9.8% of the outstanding issue. The announcement is here and here. It is made very clear that they do not intend to launch an offer for the whole of Vodafone. This is a statement made in such terms that they cannot in fact do so for many months – if you say you’re not going to then you’re not allowed to turn around and do so.

However, this doesn’t alleviate the pressure on the Vodafone board. For there’re lines about strategic value, and unlocking, and so on. Which means that the Etisalat decision has been taken in the belief that Vodafone shares are currently undervalued. That a reorganisation of the business will lead to a rise in the share price reflecting an increase in enterprise value.

Etisalat aren’t the only people thinking this either. As we’ve noted before there’s an idea that Vodafone should sell out of its UK position. There’s also that idea of Vodafone’s Italian operations being sold off. There’s even that substantial Cevian Capital position and the pressure from them. Do something, change the outlines of this business, in order to increase shareholder value.

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The logic being that the parts of Vodafone are thought – by some if not by many – to be worth more than the current whole of Vodafone. Having all of these assets within the one corporate wrapper in fact reduces value to shareholders, So, liberate some – or possibly even all – of those assets and increase the value that flows to the owners of Vodafone, the shareholders.

Now, whether this is wholly true or not is another matter. But the mobile telecoms and broadband businesses do seem to have settled down to being national markets. Each national one being large enough to be efficient to address. That is, there’s not obvious nor compelling logic as to why different national operators should be under the same corporate umbrella. This isn’t like car manufacturing where factories are larger than the demand from any one country.

So, it is possible that a restructuring will increase Vodafone’s shareholder value. In fact, even Vodafone’s own board seems to agree, in that they’re trying a restructuring themselves. What’s not known is exactly what it is that they’re going to propose as the solution. We’ve these varied outsiders making their suggestions but what about the management of Vodafone itself?

Well, we find that out tomorrow. As Vodafone says: “We continue to make good progress with our long-term strategic plans and will provide an update in our FY22 Results announcement on 17 May 2022.” We get to hear what Vodafone intends to do tomorrow. Whether that will sate these large shareholders – including the new one, Etisalat – we’ll find out after the announcement itself.