Shares of Vodafone Group plc saw a 4% hike after the UAE-based telecoms company e& made a surprise investment of around USD 4.4 billion in the British multinational telecommunications company.
Formerly known as Etisalat, e& confirmed that it was attracted by Vodafone’s management, diversified currency base, and efforts it put to unlock value, thus becoming its largest shareholder. However, the UAE-based telecom firm ruled out a potential complete takeover.
Experts’ opinions have been divided over Vodafone's moves, after activist investor Cevian Capital AB along with other long-standing stakeholders asked the British firm to simplify its portfolio, boost returns, and repair markets through consolidation.
e& together with Cevian, Credit Suisse Group AG, and Jefferies Group LLC could become more activist over time as well as provide Vodafone CEO Nick Read more time to invest in assets and resists pressure to sell off operations promptly, experts claimed.
Speaking of Credit Suisse, the recent stake buyout could allow Vodafone to make investment decisions regarding expenses based on short-term free cash flow generation, especially now that the British mobile operator has an industrial backer with a long-term horizon.
The spike in Vodafone shares remains 25% below the level when Read became the CEO in 2018. Meanwhile, e&’s shares spiked by 6.3% during Monday trading.
Vodafone is reportedly looking forward to building a long-term relationship with e&as well as making good progress on its long-term strategic plans.
It is worth noting that Vodafone currently has a 66.3 million customer base in Europe and 188 million in Africa and is planning to pursue mergers in several European markets given that the regulators would be more adaptable as the net investment value edged up during the pandemic.
Meanwhile, Vodafone has rejected an offer for the company’s Italian assets as well as intentionally missed out on a deal among its rivals in Spain.
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