Analyst Note| Michael Hodel, CFA |
Vodafone posted solid profitability during the first half of fiscal 2022 despite continued uneven growth across countries. Management also stated that it hopes to find a partner for Vantage Towers that would enable it to reduce its stake in the tower firm, allowing Vantage greater financial flexibility and better highlighting its value. The firm also intends to pursue in-country mergers across Europe, particularly in Spain, to improve its ability to earn acceptable returns on capital. These priorities are logical in our view, as we believe the market has overly discounted the value of Vodafone’s assets and the competitive environment remains very challenging in several places. However, considerable uncertainty surrounds these efforts, particularly as it relates to the regulatory response to any move. We don’t expect to materially change our GBX 185 fair value estimate and we believe the shares are attractive.