Vodafone chief says turnround push happening despite activist

The head of Vodafone has hit back against suggestions that the telecom group’s strategy over the past year had been shaped by activist investor Cevian Capital, which has built a stake in the company with the aim of shaking up the business and improving lacklustre shareholder returns.

Chief executive Nick Read said that looking for new ways to monetise the FTSE 100 company’s towers business and consolidate in less promising markets were “long-term themes”, indicating that they predated the arrival of Europe’s biggest activist investor, which has built an undisclosed stake in Vodafone.

He added that spinning out the Vantage Towers masts business, a move that was completed last year, was one of the first opportunities he looked at when he took over as chief executive in 2018. “We made an early call as a management team there. No other operator was talking about that execution,” he said on Wednesday.

Cevian has spent several months engaging with Vodafone’s board and management pushing it to focus on markets where it is performing well and dispose of assets that were not, according to people briefed on the discussions. It has not disclosed when it began building its stake.

The activist particularly underscored the importance of consolidating in some of the more complex and poor performing telecoms markets, including Spain, Italy and the UK, and of realising the value of Vantage Towers, that went public last year.

“We’ve talked about in-market consolidation for years, and the important moment was Covid in terms of setting a different dialogue with policymakers,” Read said, adding that the most attractive places for deals are Spain, Italy, the UK and Portugal.

He added that the company’s preferred next steps for the Vantage Towers business was to pursue an industrial merger with Germany’s Deutsche Telekom or France’s Orange to create a “European champion”.

Vodafone said it is on track to meet its full year profit targets, as it reported strong growth in its European and African market with a 3.7 per cent rise in revenue in the three months to December. Organic service revenue, the money it makes from customers, rose 2.7 per cent to €9.6bn.

In Germany, the company’s most important market, it posted revenue growth of only 1.1 per cent, due to lower revenue from variable call usage, lower retail activity because of the pandemic and the impact of new telecommunications regulations.

The company’s growth was affected last year by a fall in revenue from customer roaming. Total revenue increased 3.7 per cent quarter on quarter.

Shares in Vodafone have gained more than 14 per cent since the beginning of the year and were up 3 per cent in early trading on Wednesday morning.