Vodafone Towers Plan Seen Clearing Path For Shares: Street Wrap
Comment of the Day

July 26 2019

Commentary by Eoin Treacy

Vodafone Towers Plan Seen Clearing Path For Shares: Street Wrap

This article by Kit Rees and Thomas Seal for Bloomberg may be of interest to subscribers. Here is a section:

DEUTSCHE BANK (Robert Grindle, buy, PT 240p)
* Dividend payout, which was one major obstacle to a share price recovery, has now been de-risked
* “An outlook for improving top-line growth, FCF accretion due to M&A and the first monetization of European towers by Vodafone, should augur a material change in share price momentum”

GOLDMAN SACHS (Andrew Lee, no rating)
* 1Q results and announcement of TowerCo spin-out should provide “meaningful reassurance” to key investor concerns
* The beat on 1Q organic service revenue growth suggests 4Q19 was a trough and could encourage hopes for a return to top-line growth
* “While potentially splitting out towers may have the consequence of reducing the remainder of Vodafone Group growth and FCF visibility, management action to resolve its debt position is positive in our view”

Eoin Treacy's view

Infrastructure plays with reliable cashflows from telecoms companies have been one of the most popular avenues for playing the rollout of 4G in recent years. The success of American Tower has resulted in a significant number of copycat operations divestments springing up all over the world. As 5G is rolled out there is scope for additional infrastructure plays. 5G requires a lot more transmitters, a lot closer together than conventional 4G and will sit on top of the existing structure to ensure constant connection while on the move.

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