- Stock falls 5% to 74.54p, lowest since 1996
- Long-mooted Three UK tie-up will create Britain’s biggest operator
- Vodafone is FTSE 100’s second worst one and three-month performer
Mobile network Vodafone (VOD) is getting hammered again, which comes as no surprise, since the stock has gone ex-dividend today. The share price is -5% at 74.54p.
Even so, shares in the company have been the FTSE 100’s second worst performing over the past month (-21.5%), three months (-24.5%) and are -40% over the past year (third worst).
Put simply, you could have blindly stuck a pin in the FTSE 100 and all but guaranteed picking another stock that would have been better for your wealth.
Behind the scenes, speculation that the £20 billion company is close to sealing its long-mooted merger with the UK arm of Hong Kong rival Three is rife.
BRITAIN’S BIGGEST MOBILE OPERATOR
The deal with CK Hutchison (0001:HKG) would create Britain’s biggest mobile operator, with about 27 million customers, overtaking BT’s (BT.A) EE and Virgin Mobile/O2, owned by Telefonica (TEF:BME) and Liberty Global (LBTYA:NASDAQ).
An official announcement could come as soon as tomorrow (9 Jun), sources told Reuters.
Vodafone would own 51% of the bigger business, CK Hutchison the other 49%.
This is a deal that has dragged on for more than a year, having been sent down the regulatory rabbit hole.
Vodafone and Hutchison have argued the deal would benefit consumers by creating a network with the scale to roll out full 5G and expand broadband connectivity.
Hutchison has said it does not cover the cost of its capital in the UK, potentially hampering its ability to invest.
PROBLEMS PILING UP FOR VODAFONE
This is one of the many problems facing Vodafone, effectively a seller of a commodity product (airtime and broadband) with few growth levers to pull and little or no pricing power.
New chief executive Margherita Della Valle is keen to stamp her authority on the company, and the CEO’s stark assertion that performance had not been good enough is the sort of message the market wants to hear after the failures of a string of bosses to arrest Vodafone’s more than decade-long decline.
One of her first moves as CEO was to announce the culling of up to 11,000 staff from its payroll in just three years. But you cannot cut your way to growth so it will take more than just streamlining the business to make it a beast fit for the 21st Century world of modern communications.
You can learn more about the problems facing Vodafone by tuning in to the AJ Bell Money & Markets podcast, where the company and its struggles are discussed in depth by members of the Shares team.
