Downgrading Our Vodafone Moat Rating, Fair Value Estimate; Portfolio Simplification Is a Priority

We are relaunching coverage of Vodafone and downgrading our moat rating to none from narrow. Although Vodafone is competitively advantaged in Germany (its main market) and other minor European geographies, we believe its Italian and Spanish divisions are value-destructive. While the United Kingdom is not destructive, it remains a highly competitive market. We are reducing our fair value estimate to GBX 135 per share from GBX 185 to account for the moat downgrade and more conservative revenue assumptions.