Will VoIP hurt Vodafone too much
Posted by Cloud Net on Fri, Mar 12, 2010 @ 04:38 AM
Paul Hill reports every week for Money Week on the best shares to
purchase. This week he chose Vodafone shares to recommend.
He says positives include
- Focus on cash generation, cost reduction and speed of execution.
- iPhone release and booming smart phone sales.
- Marriage of T-Mobile and Orange reducing choice and increasing profits
- Vodafone has the fastest 3G network
- Protection against a weak pound with 85% of revenues being derived outside the UK
He says problems include
- What to do with the 44% stake in SFR - the french mobile company (the remainder is owned by Vivendi) - although Vivendi would like to buy the stake
- The 45% stake in Verizon which also doesn't pay a dividend.
- Net debt to earnings (Ebitda) ratio at 2.2
- Possible regulator interference .
- Disruptive technologies such as VoIP
He pointed out that the shares offered a 5.3% dividend yield.
If you had invested with Vodafone in the last 5 years the share value will not have declined much but neither will it have increased significantly. If you had invested at the peak of the telecoms bubble in 2000 you would have seen your investment halved but in fairness other providers have done far worse.
We think that Vodafone is a great company and if it gets it's act together the value of all those networks and connectivity could be liberated. If it purely plays defensively then the disruptive technology, which Paul so rightly identifies, of VoIP will hurt it.