(Bloomberg) — Vodafone Group Plc shares jumped as much as 4.5% after activist fund Cevian Capital AB built a stake and pushed for changes at the U.K. telecommunications giant.
Bloomberg first reported Cevian’s position on Friday. The Swedish investment firm has been pushing for improvements at the European and African group, whose shares have languished in recent years. Chief Executive Officer Nick Read has already been streamlining Vodafone, cutting costs and pursuing consolidation in key European markets.
Cevian’s presence will increase the pressure. It’s the latest example of a fund agitating at a major telecom business, coming after its own campaign at 5G equipment and software maker Ericsson AB, and following in the footsteps of Elliot Investment Management’s dramatic interventions at Telecom Italia SpA and AT&T Inc.
Once dominant companies, many big phone companies have struggled to adapt and have become tempting activist targets. In the last year, French broadband billionaire Patrick Drahi built an 18% stake at Vodafone’s British rival BT Group Plc. He has rarely been a passive investor, but his intentions at the former state monopoly remain unclear.
Activists have urged their targets to improve management while offloading unwanted business units. In most cases that’s meant prising out infrastructure assets that are more highly valued by specialist investors. Vodafone has already spun out and floated its mobile masts in the form of Vantage Towers AG, but it could sell down its stake or more aggressively strike deals to increase its scale.
“There is no silver bullet to re-rate Vodafone, but there are genuine rays of hope,” Jefferies analyst Jerry Dellis wrote in a note to clients Monday. Those positives include “pressure on management to deliver on consolidation and tower deal commitments” and new focus to priorities like customer service.
What Bloomberg Intelligence Says:
Swedish activist-investment firm Cevian Capital’s targeting of Vodafone to push for changes may prove difficult, with shareholders Blackrock (6.4% stake) and Vanguard group (5.9%) retaining more influence than the challenger’s 3%. According to Bloomberg News, Cevian is said to be pushing for share buybacks, which — given Vodafone’s deleveraging focus — may necessitate the acceleration of tower deconsolidation and further divestments.
— Erhan Gurses, BI telecoms analyst
Vodafone May Not Be Easily Swayed by Active-Investor Push: React
(Updates with context from fifth paragraph)
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