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Recent years haven’t been kind to the Vodafone Group (LSE: VOD) share price and long-suffering shareholders. Nor have the past 10, 20, and 30 years, to boot. In fact, owning Vodafone stock has been a pretty thankless job for most of this century.
Vodafone’s volatility
As I write, Vodafone shares trade at 75.62p, valuing this well-known telecoms group at £19.2bn. This is a mere fraction of its peak market value. In fact, during the dotcom bubble that burst in spring 2000, Vodafone was Europe’s largest listed company.
But time has taken a toll on this one-time corporate Goliath. Though Vodafone stock is up 12.3% over 12 months, it has slumped by 32.8% — almost a third — in the past half-decade. Even worse, the share price is at the same levels today as in September 1995, almost 30 years ago. Wow.
What’s more, this FTSE 100 share has got stuck in a rut over the past year. Vodafone shares have traded from a low of 63.06p on 8 August 2024 to a high of 79.5p on 17 September 2024, with no signs of any coming breakout.
Another loser
Over the years, I’ve heard brokers and analysts refer to the European telecoms market as ‘the graveyard of value’. With Vodafone, this certainly seems to ring true, especially after the group halved its cash dividend last year.
For the record, my wife and I bought this stock in December 2022 for its high dividend yield. We paid 90.2p a share for our holding, so we are nursing a capital loss of around a sixth (-16.2%). However, Vodafone’s juicy dividends have cushioned the blow of this decline, making things better than they seem.
Good news at last?
However, with €33.2bn (£28bn) of net debt on Vodafone’s balance sheet, turning this tanker around will be a tough task. But perhaps, at long last, there is light at the end of the tunnel for shareholders?
First, Vodafone’s proposed merger with rival Three UK was approved by UK competition regulators in December. This will allow the merged entity to invest up to £11bn into 5G upgrades with increased confidence.
Second, while the firm is failing to grow revenues in its core European markets (notably the UK and Germany), it is expanding in emerging markets. These fast-growing regions include Africa, the Middle East, and Turkey, with Africa now accounting for a fifth of group revenue.
Third, Vodafone is in talks to sell its stake in Dutch joint venture VodafoneZiggo to its 50/50 partner Liberty Global for over €2bn (£1.7bn). Although VodafoneZiggo was created in 2016, it failed to lead to a bigger deal between these two telecoms Titans. Liberty also bought a 5% stake in Vodafone itself in 2023.
Summing up, I was unhappy with Vodafone’s decision to slash its dividend, but the group must generate cash to invest in future growth. Merging with Three UK will create a British giant with 29m customers, making it the UK’s #1. Telecoms is a scale business, so I welcome this move.
Finally, despite our capital loss, we intend to hold onto our Vodafone shares. I highly rate current CEO Margherita Della Valle, but she needs more time to bring new life to this limping behemoth!
