Silver Sunrise Euro TMT Daily: EU TMT Sector Specialist Commentary

Research evidence excerpt

Silver Sunrise Euro TMT Daily: EU TMT Sector Specialist Commentary

ior to a recent sector sell-off, (2) Xavier Niel has undertaken this transaction through a new

vehicle (Vega), established solely for this acquisition (no funding details are provided). Niel notes “Vega intends to be a

committed shareholder” and is “confident in Vodafone’s long-term growth and untapped value creation potential”, (3) We

find it intriguing Niel is taking on a $6bn bet, at a time when investors are obsessed with the satellite disruption threat. It

suggests confidence in the sector outlook, and a belief satellite concerns are over-done, (4) This is not the first time Niel has

shown interest in Vodafone. In Sept’22 he bought a 2.5% stake arguing “there are opportunities to accelerate both the

streamlining of Vodafone’s footprint and the separation of its infrastructure assets, further reduce costs, improve profitability,

accelerate broadband development in Germany and other geographies, and enhance focus on innovation”. Niel is not known

to be a passive investor. Hence we can’t help but wonder whether he has acquisition interest in Vodafone’s operations.

Germany and UK screen most likely, considering their scale, and the opportunity for change. Zegona’s success in turning

around Vodafone Spain, offers an interesting case study, (5) These developments support our belief that investors should use

recent satellite driven sector weakness, to tactically add to names with earnings upside, cheap valuations, and consolidation

related optionality, (6) Whilst E&’s investment in Vodafone was not particularly successful financially when viewed against

the holding period, our analyst Karin So notes the exit is consistent with her belief new management will take a more