Vodafone Group Plc (ADR) (VOD)

Vodafone Group (Vodafone) is a mobile telecommunications company that has its operations spanning across Europe, the Middle East, Africa, Asia Pacific, and the U.S. through its subsidiary undertakings. Vodafone Group generates revenues through two business divisions: mobile telecommunications (95.6% of the total revenues during fiscal year 2006) and other operations (4.4%).

The company has recorded weak margins and returns in the last few years. Its operating margin and net profit margin for the period 2002-2006 were significantly lower than corresponding industry averages. Weak margins and returns indicate a higher cost base, and the company’s inability to manage assets profitably, which can adversely affect its long-term profitability and investor confidence.

The company has seen a drop in the average revenues per user (ARPU) and increase in churn rate across most of its key markets like Germany, Italy etc. In fiscal 2006, the company’s ARPU was down and the churn rate was high as compared to that of fiscal 2005. However, collectively, these are mature markets, which constitute a major part of the company’s total revenue.

Finally, Vodafone has a significant amount of indebtedness and most of it is long term.
For the past several years, the company has been incurring losses and as a result, the company might not be able to pay off its interest expenses. This could also put Vodafone at a relative disadvantage against its competitors, thus, impairing its ability to make investments and obtain additional financing for capital expenditures, acquisitions, or general corporate or other purposes.

The company largely operates in the matured markets of the world, which tend to have intense competition and relative pricing pressures, thereby, leading to squeezed margins. The company is no different from other telecom operators and hence it also poses a serious problem relating to its future-outlook.

Underrated strengths and overrated weaknesses. Solid financials. Dividend provides excellent rate of return on investment.

Conan Holder < 1.5 (bankruptcy risk > 75%), Altman for private companies Z score < 1.23. This company is in bad shape; other companies with valuation problems: BOW, CMS, TRY.B, LUK, LPX, SNSTA, TECUA, XRIT, CAR, VOD, GDP, MDZ, MCF, EPL, VMED, MIC, LINE, BKD ,AAV, EROC.

This one's a bit more of a gamble because of all of the crazy regualations that occur almost daily in the EU. However, VOD owns 1/2 (yes... HALF) of Verizon Wireless and it is also one of the largest telecommunications companies in the world. Vodafone has cast a lot of nets and is fiercely targteting the Northern Africa, India, and China markets. Has anybody been to Japan, Mumbai, or Shanghai in the last few years? Nobody owns a cell phone... they own 3! Plus, cell phones are used for much more functionality (i.e. a cell phone can be used to pay for items in a vending machine) in those countries. Despite the obsticles they are navigating in th EU, VOD is wonderfully internationally diversified and they have the ability to make money while charging less for their services than other companies. One more thing... Vodafone hit a high of $40.87 in November and has since fallen 27%. Some of this drop is due to the EU regulations, but the vast majority is from the shockwave of the U.S. housing market crash. We rely on our cell phones... do you really think people will be cancelling their plans to save a buck? Nope. This one's a winner.

O.K. it's true. I'm not a large-cap kinda' guy. It was an accident, as I stumbled over Vodaphone perusing DutchMark's holdings. He's a first-class stock picker! Even wizards now and then have been known to replicate intellectual property.

What's to like? a 45% stake in Verizon, for starters. (See my Verizon pitch.) Doing a little research, I've also discovered that Vodaphone is an Inside Value pick. Oh, how did I come to be here?? Still, it's a big plus. There's going to be some dynamic forces acting on Vodaphone, for sure, over the next 5 years as they are arguably the biggest forerunner in the roll-out of 3G. One last interesting thing I read is that Vodaphone tries to operate only in countries where they have some sort of competitive advantage. How true that statement is, I'm not certain.

The big question?? How will the masses respond to 3G? If uptake is strong Vodaphone will do very well. If not, well....

Will Frankenhoff wrote a great little article on Vodaphone for the Motley Fool recently. If you would like to give it a read click below:

http://www.fool.com/investing/international/2006/12/11/time-to-answer-the-vodafone.aspx

Approximately three years ago a friend mentioned this company and stated it had serious growth potential. I didn't know anything about the stock market but watched it weekly since. My interest has bee peaked as its stock price has grown 400%. I still know nothing about the stock market, but decided I'd learn...Here goes nothing.

From personal experience, they have a huge emerging market exposure. That's a real growth market for telecoms, where infrastructure has always been wanting.

Places like Africa and South America are jumping over the landlines and straight into cellphones. These are the markets where I've seen VOD capturing market share, and these markets are growing VERY fast.

The exposure to Verizon and the US is nice, Europe ditto, but the EMs, that's where I think they will outperform.

Is now pending regulatory approval on buy of Indian cell phone company; if completed, Vodafone would have excellent capacity for expansion in what is likely to be a growing mobile phone market. Good experience in third world mobile phone networks puts this company in good position for continued expansion in emerging markets even as European market becomes saturated. Holds 45% stake in Verizon which gives company benefit from US market.

too many things to like!

I've owned Vodafone for about a year now. It has done very well and I plan to own it for quite a while longer. There never was a real moment where I thought 'now is a good time to add it to CAPS' so I figured after a little market-correction is as good a time as any.

Apart from being the best cell-phone carrier in the world, through its 45% stake in Verizon you get to benefit from that company as well. Verizon would like to buy back their stake, but so far Vodafone thought the price was not right, and I agree. Verizon is also a true cash-cow. In case Vodafone sells their Verizon stake it's maybe time to recconsider, but until then I think this is a good investment two excellent businesses.

Mark

Undervalued, growing faster than the market despite a 30% PE discount

Building a global brand, great business model, and even in a recession no one will give up their mobile phone.

good value

This stock is part of my long term income strategy.

10yield.com

I like global telecom. These are profitable companies trading at low valuations, in an industry less sensitive to recession. Will likely see wave of consolidation over next five years.

Global exposure, a solid stake in Verizon and expanding markets in India and other countries seem to indicate this one should be on the rise again soon...

Lots and lots of customers. Second largest mobile company in the world. A UK stock which is safer IMHO than some other international stocks.

Qwest customers coming over from sprint.

I believe the iphone deal will make the difference. at least in mid-range term. I didn't believe in iPhone at first... until played with it enough and now it's #1 gadget I want to buy (when they release 3G version).