Liberty Global Plc’s new stake in Vodafone Group Plc is set to increase pressure on the company to strike deals to boost its share price, the latest twist in the sometimes-contentious relationship between the two European telecom giants.
(Bloomberg) — Liberty Global Plc’s new stake in Vodafone Group Plc is set to increase pressure on the company to strike deals to boost its share price, the latest twist in the sometimes-contentious relationship between the two European telecom giants.
Liberty said Monday it had acquired a 4.9% stake in rival Vodafone, which it described as an “opportunistic” bet that the stock is undervalued. Vodafone shares have fallen about 28% in the past 12 months — hitting their lowest level since 1997 in December — and it recently ousted its chief executive officer.
Liberty Global is the latest strategic investor to build a stake, joining French billionaire Xavier Niel, who runs the carrier Iliad and owns about 2.5%, and Abu Dhabi’s Emirates Telecommunications Group Co., which owns 13%. That means about a fifth of Vodafone is owned by other telecom operators.
Read More: Xavier Niel Offers Vodafone Help to Break Up Telecom Giant
Credit Suisse analyst Jakob Bluestone said in a note that Liberty’s stake shows that there “seems to be a growing body of shareholders in favor of a breakup of some assets.” Niel has said Vodafone needs to streamline and sell infrastructure, and last year he bid unsuccessfully for Vodafone’s Italian unit. Meanwhile Bloomberg previously reported that e& has explored investing in Vodafone’s African business.
Vodafone shares rose 4.2% to 97.96 pence in London trading at 12:47 p.m. on Tuesday.
Liberty Global CEO Mike Fries and Chairman John Malone have worked with generations of Vodafone management including current interim CEO Margherita Della Valle, who’s been with the company for almost three decades.
Liberty said it isn’t considering an offer for Vodafone or seeking a board seat, saying it bought the shares because it believes “that Vodafone’s current share price does not reflect the underlying long-term value of their operating businesses, or their announced consolidation and infrastructure opportunities.” Vodafone declined to comment on the holding.
Della Valle said during her first earnings report in the role last month that Vodafone needed to “do better.”
“There is more to do and our focus is to provide a better service to our customers, become a simpler business and deliver growth,” she said.
In the past, when Vodafone was searching for strategic deals to reignite growth, the company held talks about a series of potential transactions with Liberty. In 2015, after months of talks, discussions were called off after the companies failed to agree on price and structure. The corporate cultures had clashed with Vodafone’s more conservative, dividend-focused ideology colliding with Malone’s appetite for risk and debt.
In the last decade the two groups have reshaped European telecoms with major deals. In 2019 Liberty sold Vodafone its German and eastern European businesses for €18.4 billion ($19.7 billion), which is now Vodafone’s biggest source of profits, though also a source of consternation for management.
Vodafone and Liberty share a 50-50 joint venture in the Netherlands called VodafoneZiggo, while competing in the UK and Ireland.
In 2015, Malone told Bloomberg a combination with Vodafone would be a “great fit” and compared it to “a big banana in the jar.”
“The question is: how do you get your hand out of the jar with the banana?” he said.
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