French billionaire Xavier Niel has scooped up a 2.5 per cent stake in Vodafone, paving the way for the telecoms entrepreneur to potentially shake up the underperforming UK group.
Mr Niel, who bought the stake through his investment vehicle Atlas Investissement, hinted at his intent in a statement that said there were “opportunities to accelerate ... the streamlining of Vodafone’s footprint and the separation of its infrastructure assets”, as well as improve profitability.
The Frenchman has been the biggest backer of Eir since 2018.
The unexpected Vodafone move comes after Mr Niel took his telecoms group Iliad private last year and picked up the pace of acquisitions in Poland and elsewhere to reach about 50 million active subscribers and €10 billion in revenues.
It remains to be seen if the billionaire will add to his stake or ask for representation on the board, but he has already shown that he has a record of acting like an activist investor. He initially bought a small stake in French real estate group Unibail in 2020 and then quickly added to it, acting with an ally to oust the chief executive, change the group’s strategy and join the board.
“He would have to get a lot more involved to ask for a board seat,” said Robert Grindle, an analyst at Deutsche Bank. “By default, he’s an activist now ... even if he doesn’t call himself one. Anyone who wants to buy the stock now [will] see catalysts.”
Mr Niel’s investment in Vodafone comes after another French telecoms billionaire Patrick Drahi gradually built an 18 per cent stake in BT last year. That sparked widespread speculation that the veteran dealmaker may eventually try to wrest full control of the company.
Mr Grindle added that the two billionaires were likely to have seen “lots of value” in telecoms assets that the “public markets were not valuing ... right”.
The 2.5 per cent stake that Atlas has built is worth about £750 million (€856 million) at current market prices, although it was not disclosed whether the stake was all in shares or partly in derivatives.
Vodafone in February rejected an €11bn bid for its Italian business from Mr Niel’s Iliad, a provider in France, Italy and Poland, and private equity fund Apax. The offer represented about seven times earnings before interest, taxes, depreciation and amortisation.
Vodafone’s share price gained 2 per cent in early morning trading, but was still down 6 per cent in the year to date, at 108.5p.
The global telecoms group has been under pressure since it emerged that Cevian Capital, Europe’s largest activist investor, had built an unspecified stake in the company, and was angling for an overhaul of what investors believed to be an overly convoluted business model.
Cevian has called for the company to shed poorly performing parts of the business and complete mergers or acquisitions in markets that chief executive Nick Read has said he is looking to do deals in, namely the UK, Italy and Spain.
Mr Read is also aiming to sell a significant stake in the group’s masts business, Vantage Towers, that was listed last year and has received interest from multiple private equity groups, according to a person briefed on the discussions.
Several Vodafone investors have said they are keen for Vodafone to sell a large stake in Vantage soon, which would free up cash to reduce debt and pursue deals in both core markets as well as those that are not performing as well. Other telecoms groups such as Altice and Deutsche Telekom have spun off towers businesses at rich valuations.
Last month, Vodafone agreed to sell its Hungarian business for $1.8bn to 4iG and Corvinus Zrt, a Hungarian state holding company.
In May, state-controlled Emirates Telecommunications Group announced that it had acquired a 9.8 per cent stake in Vodafone for about $4.4bn, one of the largest investments it had made in more than a decade.
Vodafone has been in talks to combine its UK operations with its domestic rival Three UK, the mobile operator owned by Hong Kong infrastructure conglomerate CK Hutchison, according to people briefed on the discussions. — Copyright The Financial Times Limited 2022
