Vodafone share price Jefferies warns telco may need to trim dividend

Jefferies has trimmed its stance on Vodafone (LON:VOD), arguing that the telco’s dividend is too generous for its operating prospects, WebFG News reports. The comments come after last week, the telco’s Italian unit acquired spectrum for 5G services for €2.4 billion.

Vodafone’s share price has fallen deep into the red in today’s trading, having given up 1.82 percent to 151.76p as of 10:34 BST. The stock is underperforming the broader UK market, with the benchmark FTSE 100 index currently 0.06 percent worse off at 7,229.09 points. The group’s shares have lost more than 28 percent of their value over the past year, as compared with about a 3.6-percent dip in the Footsie.

Jefferies trimmed its stance on Vodafone from ‘buy’ to ‘hold’ yesterday. WebFG News quoted the analysts as saying that the telco was ‘structurally squeezed,’ being neither a ‘national champion’ deploying superfast fibre to customers’ homes, ‘nor pay TV leader nor remedy-taking challenger’.

The analysts reckon that the “need to focus on debt reduction” means that even a large dividend cut “will not free up resources to invest more into projects that might enhance earnings growth organically” to deal with these structural inadequacies.

Jefferies further noted that even if Vodafone sold its mobile towers this would not be enough, as it would merely replace financial debt with ongoing service fee obligations to the buyer, and potentially allow challenger rivals access to strategic sites.

What other analysts say?

Credit Suisse, which sees the blue-chip telecoms group as a ‘buy,’ set a price target of 225p on the shares yesterday.

According to MarketBeat, the blue-chip group currently has a consensus ‘hold’ rating and an average price target of 230.19p.

As of 10:44 BST, Tuesday, 09 October, Vodafone Group plc share price is 151.64p.