Jefferies downgrades Vodafone ahead of annual results on tough industry conditions

– Jefferies on Friday downgraded Vodafone Group Plc for the primary time in two years, citing the telecom group’s vulnerability in tackling rising inflation and headwinds in Germany, forward of the corporate’s annual outcomes subsequent week.

The world’s second largest cellular operator should be “cautious” whereas offering outlook as the corporate is dealing with intense competitors in a number of key markets amid rising prices, analyst Jerry Dellis mentioned, after downgrading the corporate to “maintain” from “purchase”.

Vodafone is ready to announce its annual outcomes on Might 17.

“There isn't a aggressive let-up in most markets, and a excessive profile try to steer trade worth indexation just isn't getting far… its lean price base lacks the apparent inflation security valves that could be obtainable to incumbent peer,” Dellis mentioned.

Vodafone is already dealing with stress from Europe’s largest activist fund Cevian Capital to simplify its portfolio, improve its technique in key markets and enhance returns.

The brokerage added the market is just too optimistic about Vodafone’s outlook in Germany regardless of pricing challenges and stiff competitors from Telefonica Deutschland Holding and Deutsche Telekom. It mentioned the corporate might want to spend extra to combat off these rivals in its largest market.

Vodafone is pursuing mergers with rivals in a number of European markets and is seeking to extract worth from its controlling stake in Vantage Towers, together with approaches from international infrastructure funds.

“Six months on from Vodafone’s dedication to actively pursue market construction alternatives, together with strategic community partnerships and in-market consolidation, the dearth of seen progress is an issue,” Jefferies added.