Cantillon: Vodafone shareholders despair of return

Vodafone shareholders finally got a clear view of the future shape of their investment yesterday with the company outlining exactly how they can expect to receive the "return of value" it promised in the wake of the $130 billion deal by the company to exit the US market.

The company has spent the majority of the money it received from Verizon – its partner and now sole owner in the US joint venture – in an attempt to keep long-suffering shareholders onside.

And they have been suffering, at least the 380,000-plus Irish investors in the company have. Such are the losses to date that Irish investors should not have to pay a cent in tax on a cumulative €606 million-plus payout – unless they sat on their hands, in which case they will give back up to 55 per cent of their handout to the Revenue.

The company has also triggered a share consolidation which means investors will, from Monday, hold just six shares for every 11 they currently own.

The move is predicated largely on a desire by the company not to see the share price fall sharply when trading re-opens. Obviously, minus the US business, the company is a different proposition for the markets than it was heretofore. Vodafone hopes the consolidation will protect the value of shareholder investments.

That remains to be seen. Vodafone has exited one major market and is facing challenges in others. It appears to be looking increasingly to emerging
economies but it is not having it its own way here either.

The recent turbulence triggered by the US tapering of quantitative easing shows the volatile nature of many of these markets, where substantial and durable middle classes are just emerging.

Alongside that, the experience in India where Vodafone this week paid $3 billion just to hold on to existing licences in three key cities shows the rapidly escalating costs involved.

Vodafone’s Irish investors are close to despairing of ever seeing a positive return on their initial investment.

On current form, it appears that little short of a bid premium should the
company find itself a target will deliver them a profit.