This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Stick With Vodafone

This article appeared Sept. 4, 2013, on Real Money. To read more content like this, + see inside Jim Cramer's multi-million dollar portfolio for FREE Click Here NOW.

Vodafone (VOD) recently announced its massive deal to sell off the company's 45% stake in Verizon Wireless (VZ - Get Report) for a whopping $130 billion. This was on the high end of what most had estimated the deal would be worth, and it was certainly good news for Vodafone shareholders.

The even greater news, however, was how Vodafone plans to spend the proceeds. Management says it will pay off a total of $20 billion in debt and return a massive $84 billion in cash to shareholders, and it will apparently spend a more modest $26 billion on acquisitions and investment. To put this into context, the company's American depositary receipt market capitalization is only $156 billion as of today.

For myself, as a Vodafone shareholder, my original fear was that management would plow the majority of proceeds into questing for a newer, bigger buyout, paying an equally big premium and squandering lots of money along the way. But, as we've seen here, Vodafone will actually be quite lean. The acquisitions it is seeking seem focused and thematic.

While many large shareholders wanted to see more fireworks on the M&A front, I believe this mix is ideal and shows tremendous capital discipline. It's really a continued validation of Vodafone's record as the most shareholder-friendly big telecom firm in Europe.

Fortress Europe

Thus far, Vodafone's acquisitions have targeted cable providers in the U.K. and Germany. There is talk of buying Spanish and Swiss cable providers, too. Why cable? It's because Vodafone, as a pure play mobile telecom, faces obsolescence in a world where consumers want the ease and simplicity of "bundled" cable or satellite television, wireless phone, Internet and landline services. This is also why Vodafone is building out its fiber optic network in Europe and launching 3G services in smaller countries.

If Vodafone wants to truly leverage mobile data growth in Europe, it needs to be competitive with bundling and raise its numbers in average revenue per user. By making these smaller, strategic cable acquisitions, Vodafone is planting the seeds for the company to grow and remain relevant in Europe without breaking the bank.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free

Markets

Chart of I:DJI
DOW 15,973.84 +313.66 2.00%
S&P 500 1,864.78 +35.70 1.95%
NASDAQ 4,337.5120 +70.6750 1.66%

Our Tweets

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs