In top news on UK stocks, Vodafone Group PLC (GB:VOD) rallied over the sale of its Italian unit, Vodafone Italia, to Switzerland-based Swisscom AG (DE:SWJ) for €8 billion in cash. The company further announced plans to allocate €4 billion from the proceeds to share buybacks in FY25. After the deal, Vodafone will reduce its annual dividend from €0.09 to €0.045 from FY25 onwards. The total payout for FY24 will be maintained at €0.09 per share. Vodafone shares had gained almost 5% at the time of writing.
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Vodafone is a European telecommunications company that offers a variety of services like voice, messaging, and internet connectivity across fixed and mobile networks.
Vodafone’s Strategic Portfolio Optimization
The sale marked a final stage in Vodafone’s efforts to streamline its portfolio. In May 2023, Vodafone unveiled a reshaped European portfolio, which reflected intentions to divest its business in Italy and Spain. With this move, the company will focus on expanding telecom markets and leverage its strong position to drive consistent growth in Europe. Additionally, it will support Vodafone’s increased focus on B2B amid the growing digital services market.
Additionally, this sale enables Vodafone to completely divest from the Italian market, where it encountered difficulties in achieving a return that could surpass the cost of capital.
Meanwhile, Swisscom funded the entire acquisition through debt and plans to merge Vodafone Italia with its subsidiary Fastweb. Swisscom anticipates achieving €600 million in annual cost savings from the integration of the two entities.
Are Vodafone Shares a Good Buy?
According to TipRanks, VOD stock has a Moderate Buy consensus rating based on a total of nine recommendations. The average price forecast is 90.78p, with a high forecast of 145p and a low forecast of 68p. The Vodafone share price target implies an upside of 31.5% on the current trading levels.
