Vodafone has recently been the subject of renewed bid speculation, but ahead of an analyst trip to see the mobile group's African assets, Oriel analysts are cautious about its prospects.
Oriel's John Karidis said he expected some upbeat notes ahead of the visit, with the hope that Vodafone would call the bottom of its recent performance at its November interims. Karidis said he remained cautious and advised investors to sell into any strength:
Rumours of a bid for Vodafone keep re-surfacing. Softbank was the suitor named most recently. First, Softbank has a mountain to climb now that US regulators have blocked its subsidiary, Sprint, from merging with T-Mobile US. Secondly, the price of any bid for Vodafone is likely to reflect the group's big structural challenges. Thirdly, a company like Liberty Global has no need to buy mobile networks to add mobile to its offerings.
We track what Vodafone's main rivals say every quarter and based on this we think the group faces lasting structural challenges in Europe (60% of group value excluding the recent buy-out of Ono in Spain). Therefore we doubt that the extra billions Vodafone has spent, and will spend, will boost its value prospects anytime soon.
We estimate Vodafone is on 2014/15 and 2015/16 enterprise value/EBITDA multiples of 5.8 times and 5.6 times, versus the sector on 6 times and 5.9 times. Vodafone should trade at a clear discount to the sector. Until it starts to regain share in big markets in Europe, without yet more extra spend, investors will more likely doubt the dividend is safe than be reassured by it.
Elsewhere there were reports from Economic Times that India - where Vodafone has a significant presence - might offer 4G spectrum in the next mobile auctions.
Vodafone shares are currently down 2p at 204p.
