Europe’s largest activist fund, Cevian Capital, is urging Britain’s Vodafone mobile group to restructure its portfolio, improve its strategy in key markets and renovate its board to draw a line under years of poor stock prices.
Cevian has built an undisclosed stake in the FTSE 100 group and has worked with its board and management for months, according to people with direct knowledge of the subject.
The investor is particularly interested in Vodafone being more aggressive in fostering consolidation with mobile operators in some of the weaker and more cumbersome telecommunications markets, including Spain, Italy and the United Kingdom, people said.
Cevian has also targeted the company’s board, which it says consists of people with little or no experience in the telecommunications industry and therefore limited ability to act as a strategic support in decision-making by management.
Vodafone, which is due to announce its latest results on Wednesday, declined to comment, as did Cevian.
The campaign means that Vodafone joins healthcare group GlaxoSmithKline, energy company Shell and consumer goods giant Unilever as the newest UK corporation with a well-known activist publicly on the investor register.
BT, the UK’s current telecommunications provider, is also under pressure from Franco-Israeli tycoon Patrick Drahi, who took an 18% stake in the group.
For Cevian, which manages about $ 15 billion, Vodafone’s stake is in line with an investment strategy that often calls for simplifying complex conglomerates that the activist believes are inefficiently managed, suffocating the best units and generating poor returns on investors.
Cevian follows this approach in other active campaigns in the Pearson education group and insurer Aviva in the UK, as well as the Swedish telecommunications equipment group Ericsson.
Vodafone shares have fallen sharply over the past five years. Including dividend payments, shareholders would lose 9.4% against a 24.4% gain on the FTSE 100 during that time.
European telecoms executives hope regulators will take a more favorable stance on market consolidation than in previous years, when deals such as the O2-Three merger in the UK were blocked by the European Commission due to competition concerns.
Nick Reed, the former chief financial officer of Vodafone, who took over as CEO in 2018, has called for greater consolidation in European markets in recent months and complained about growing fragmentation in the industry.
In December, he called for more leniency on the part of FT regulators, saying that “European telecommunications already have the highest capital intensity of all sectors, but at the same time 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 operator Three UK from its current owner CK Hutchison, although the deal never materialized.
Cevian also wants Vodafone to consider potential strategic opportunities for its tower business, which was separated last year, believing there could be significant synergies from merging with other tower owners. The main targets for merging or acquiring towers include Deutsche Telekom and Orange.
Bloomberg first revealed that Cevian has created a stake in Vodafone.