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Technology Stocks : Vodafone-Airtouch (NYSE: VOD)
VOD 14.65-0.4%Jan 30 9:30 AM EST
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To: MrGreenJeans who wrote (2825)5/30/2000 9:16:00 PM
From: MrGreenJeans  Read Replies (1) of 3175
 
Lex: Vodafone
Published: May 30 2000 21:19GMT | Last Updated: May 30 2000 22:08GMT



The Orange sale removes a huge cloud hanging over Vodafone's shares: the threat that cash flow problems would force the company to issue more equity or lose its single-A credit rating. Such fears were overstated, but depressed the shares anyway. Vodafone might have extracted a higher total payment by conducting an auction. But not much more. France Telecom offered a quick deal with cash up front and the promise of an early exit from the shares which make up the rest of the price. The deal reduces uncertainty, and should allow investors to focus once more on Vodafone's operations.

Tuesday's results show the company is generating rapid organic growth to complement its aggressive acquisitions. On a like-for-like basis, including Airtouch but excluding Mannesmann, earnings before interest, tax, depreciation and amortisation rose 30 per cent. Margins look close to bottoming out, at a healthy 31.4 per cent. Investors should not set too much store by the forecast 15 per cent return on investment in UK third generation services: the important point is that the overall return from 3G should be considerably higher than in the UK.

So far, though, Vodafone's growth has come from adding subscribers, and entering new markets. Going forward subscriber growth will inevitably slow. Vodafone's earnings growth will have to come from data and internet services. The Vizzavi portal joint venture with Vivendi is promising, as are plans to invest in software applications. But this is a brave new world, where Vodafone has to prove itself once again.

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