- Cash will be used to cut €67.5 billion long-term debt
- Activists demanding action after years of poor returns
- Former CEO Read left at end of 2022 following mounting criticism
European mobile network Vodafone (VOD) has heeded calls from investors and will cut into its enormous debts after striking an agreement to sell its Hungarian assets. The terms will see Vodafone receive €1.7 billion in cash from Budapest-listed 4iG (IGNY:BU) and Hungary-owned vehicle Corvinus.
In a statement on Monday (9 Jan), Vodafone said the proceeds from the sale will be used to pay down debt.
‘This combination establishes a scaled converged operator across mobile and fixed communications and supports the Hungarian government’s goal of creating a national information and communications technology champion,’ said Vodafone’s interim chief executive Margherita Della Valle.
PRESSURE FROM INVESTORS
The deal comes as Vodafone faces pressure from activist investors to scale back its international businesses, cut debt and bolster shareholder returns. At the end of September 2022, Vodafone had more than €67.5 billion of long-term debt putting the company’s debt-to-equity ratio at about 116%.
Former CEO Nick Read stepped down at the end of 2022 after more than four years in the top job. Read had been criticised for extending Vodafone’s poor track record for shareholder returns. Just days before Christmas, the Vodafone share price hit a 25-year low of 83.8p.
Vodafone shares have handed shareholders an average 2.64% a year return, including dividends, over the past decade. Returns from a FTSE 100 tracker would have produced a 6.33% annualised total return, according to Morningstar data.
The sale, which gave a sharp lift to Budapest-listed shares in 4iG (up 5% to 758 Hungarian Forints), is expected to be completed this month. Vodafone shares nudged fractionally lower in morning trade to 88p.
