Activist Cevian pushes for sweeping overhaul at Vodafone

Europe’s largest activist fund Cevian Capital is pushing UK mobile group Vodafone to restructure its portfolio, enhance its strategy in key markets and refresh its board to draw a line under years of poor share price performance.

Cevian has built an undisclosed stake in the FTSE 100 group and has been engaging with its board and management for months, according to people with direct knowledge of the matter.

The investor is particularly keen for Vodafone to be more aggressive in driving consolidation with mobile operators in some of the weaker and more unwieldy telecoms markets, including Spain, Italy and the UK, the people said.

Cevian has also taken aim at the company’s board, which it believes is composed of individuals with little or no experience in the telecoms industry and therefore with limited ability to act as a strategic backstop to management’s decision-making.

Vodafone, which is set to report its most recent 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 latest large UK corporation with a high-profile activist publicly on its investor register.

BT, the UK’s incumbent telecoms provider, is also under pressure from Franco-Israeli tycoon Patrick Drahi who has taken an 18 per cent stake in the group.

For Cevian, which manages around $15bn, the Vodafone bet fits in with an investment strategy that often calls for simplification at complex conglomerates which the activist believes are run inefficiently, suffocate the best units and generate poor investor returns.

Cevian is pursuing this approach in other active campaigns at education group Pearson and insurer Aviva in the UK as well as Swedish telecoms equipment group Ericsson.

Shares in Vodafone have sharply underperformed over the past five years. Including dividend payments, shareholders would have lost 9.4 per cent versus a gain of 24.4 per cent for the FTSE 100 over that time.

European telecoms executives are hopeful that regulators will take a more favourable view of market consolidation than they have in previous years, when deals like a merger between O2 and Three in the UK were blocked by the EU commission because of competition concerns.

Nick Read, Vodafone’s former finance chief who took over as chief executive in 2018, has called for greater consolidation in European markets in recent months and bemoaned increasing fragmentation in the industry.

In December, he called for more leniency from regulators in the FT, arguing that “European telecoms already has the highest capital intensity of all sectors, yet very low returns”. He added “Our competition framework must adapt to these changes.”

Vodafone last year examined the possibility of a deal with rival carrier Three UK from its current owner CK Hutchison, although a deal never materialised.

Cevian is also keen for Vodafone to look into potential strategic opportunities for its towers business, which was spun out last year, believing there could be considerable synergies from a merger with other tower owners. Key targets for a towers merger or acquisition include Deutsche Telekom and Orange.

Bloomberg first revealed that Cevian had built a stake in Vodafone.