Vodafone rises after Liberty Global stake boosts M&A hopes

Shares in Vodafone rose 4% to a 12-week high on Tuesday after Liberty Global bought a near-5% stake, giving it scope to influence deals the British telecoms group is pursuing.

John Malone’s Liberty Global, the joint owner of Virgin Media O2, a major rival to Vodafone in Britain, said it was an opportunistic investment. It ruled out making a takeover bid and said it was not seeking a board seat.

Liberty Global’s Chief Executive Mike Fries said Vodafone’s share price did not reflect the underlying value of the business and its opportunities for consolidation.

Shares in Vodafone, which operates in 21 countries in Europe and Africa, have more than halved in the last five years as intense competition in markets such as Italy and Spain has limited growth despite huge network investment.

Interim chief executive Margherita Della Valle, who took over when Nick Read resigned in December, is simplifying operations to improve returns in Europe, where three out of its four biggest markets declined last quarter.

Investors, however, are focused on the opportunity for M&A.

Liberty Global joins French telecoms tycoon Xavier Niel and Middle Eastern group E& on Vodafone’s shareholder register.

E& has 13% while Neil, who owns Vodafone’s Italian rival Iliad, has 2.5%.

Analysts said these industry investors had planted flags to take advantage of deals or eventually the break-up of the British group.

Credit Suisse said Liberty’s investment was “likely to increase the push for a break-up with the new CEO”.

Vodafone has announced a plan to combine with Hutchison’s Three in Britain, which if completed would cut the number of networks from four to three.

Liberty Global’s chief executive Mike Fries supports the plan, telling the Financial Times on Monday that Britain’s four-player market was an “anomaly” in its European footprint.

Shares in BT, which as the owner of Britain’s EE network, could also benefit from consolidation, rose on Tuesday.

Liberty Global is familiar with Vodafone, given the two companies jointly own Vodafone Ziggo in the Netherlands. It also sold its operations in Germany, Hungary, Romania and the Czech Republic to the British company in 2019. Kalkine Media