The incoming chief executive of Vodafone has said he is considering a sale of tens of thousands of mobile masts to reduce the company's €31billion debt pile, if the right deal can be struck.
Nick Read, chief executive designate until he takes over from Vittorio Colao next month, detailed plans at a Goldman Sachs conference in New York to shake up the business. This comes after a recent trading update that provided investors with a uninspiring outlook for the rest of this financial year because of steep competition in its Italian and Spanish markets.
Towers
The telecoms company has 110,000 towers across Europe – about 55,000 of which are directly controlled – but has been resistant to a disposal under Mr Colao. Barclays has calculated that Vodafone's European towers could be worth €12 billion.
Mr Read sought to address concerns over Vodafone’s €31 billion net debt and the sustainability of its dividend payments in the wake of its €18 billion takeover of Liberty Global’s German and eastern European operations. He argued that improving earnings performance and asset sales would help reduce borrowings.
“Towers are also a consideration,” he said, adding that Vodafone would be “pursuing” the strategy although there was “nothing today” to announce.
Mr Read also said the company would shed 1,700 jobs across shared service centres in Egypt, India and Romania this financial year, roughly 8 per cent of the workforce in that side of the business. The cuts are part of a wider drive to strip €8 billion of costs from the business as more back-office functions are taken over by “robots”, according to Mr Read, with customer service, technology and operations set to be overhauled.
The company will detail more of its plans in November when it reports results as Mr Read tries to improve confidence in the company’s strategy. “When you look at our share price the glass is half empty,” he said.
Vodafone’s share price has fallen by a fifth over the past year. The weak stock price has opened the door to activist shareholder Elliott Advisors, which has bought shares in the company and, according to one person with direct knowledge of the situation, could push for Vodafone to sell off its mobile masts.
Operations
Mr Read is a company veteran, having led Vodafone’s UK and then emerging markets operations before being promoted to chief financial officer. That experience included the formation of the Indus Towers joint venture in India, where he spent many years on the board and learnt how to best structure a separation of masts from the active parts of the network.
Mr Read said he had been looking at how to balance Vodafone’s strategic network needs against the efficiency gains of offloading its masts on to a specialist company.
He argued that there has been a shift in the tower industry where private equity-backed specialists and independent group including Cellnex have bought thousands of masts from struggling telecom groups. He argued that potential buyers had become more flexible and “more open to different formulas”, which could include joint ventures rather than disposals.
Deutsche Telekom has also been linked with a potential disposal of its towers, while companies including Sunrise in Switzerland and Altice in Portugal have already struck deals. European operators have been slower than other markets, notably Africa and the US, to sell off their masts to create value and focus on the active parts of their networks.
Mr Read said a float of its New Zealand business would likely take place in 2019 as Vodafone continues to tidy up its global operations. It has merged with rivals in India and Australia in the past year but smaller deals in New Zealand and Malta have collapsed.
– Copyright The Financial Times Limited 2018
