Activist Cevian pushes for sweeping overhaul at Vodafone

Europe’s largest activist fund, Cevian Capital, is pushing the British mobile group Vodafone to restructure its portfolio, improve its strategy in key markets and refresh its board of directors to draw a line during years of poor stock price development.

Cevian has built up an undisclosed shareholding in the FTSE 100 group and has been engaged with its board and management for several months, according to people with direct knowledge of the matter.

The investor is particularly keen for Vodafone to be more aggressive in consolidating with mobile operators in some of the weaker and more unmanageable telecommunications markets, including Spain, Italy and the UK, the people said.

Cevian has also targeted the company’s board of directors, which it believes is made up of people with little or no experience in the telecommunications industry and therefore with limited ability to act as a strategic backer for management decision-making.

Vodafone, which is set to report its latest results on Wednesday, declined to comment, as did Cevian.

The campaign means that Vodafone joins the healthcare group GlaxoSmithKline, the energy company Shell and the consumer goods giant Unilever as the latest large British company with a high-profile activist publicly on its investor register.

BT, the UK’s established telecommunications provider, is also under pressure from French-Israeli tycoon Patrick Drahi, who has taken an 18 per cent stake in the group.

For Cevian, which manages about 15 billion. USD, the Vodafone venture fits into an investment strategy that often requires simplification of complex conglomerates that the activist believes are run inefficiently, stifling the best entities and generating poor investor returns.

Cevian is following this approach in other active campaigns with the education group Pearson and the insurance company Aviva in the UK, as well as the Swedish telecommunications equipment group Ericsson.

Shares in Vodafone have performed significantly worse over the past five years. Including dividend payments, shareholders would have lost 9.4 percent against a gain of 24.4 percent for the FTSE 100 over that time.

European telecommunications executives hope regulators will have a more positive view of market consolidation than they have in previous years, when agreements such as a merger between O2 and Three in the UK were blocked by the European Commission due to competition problems.

Nick Read, Vodafone’s former CFO who took over as CEO in 2018, has called for greater consolidation in European markets in recent months and deplored the growing fragmentation in the industry.

In December, he called for more leniency from FT regulators, claiming that “European telecommunications already has the highest capital intensity of all sectors, yet very low returns”. He added “Our competition framework needs to adapt to these changes.”

Vodafone last year explored the possibility of a deal with rival carrier Three UK from its current owner CK Hutchison, though a deal never materialized.

Cevian is also keen that Vodafone looks at potential strategic opportunities for its tower business, which was spun off last year, believing there could be significant synergies from a merger with other tower owners. Key targets for a merger or acquisition of towers include Deutsche Telekom and Orange.

Bloomberg first revealed that Cevian had built a stake in Vodafone.

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