Friday, January 27, 2006

It's about value not shareprice

The Economist, which I have been reading since school days has a feature this week on Vodafone following its results presentation. It has me asking just how dumb are the analysts in investment houses. It looks at the performance of Vodafone against O2 in terms of performance against the FTSE Index. Whilst O2 has done better than Vodafone in terms of shareprice the difference is that O2 has been managed to attract a buyer whilst Vodafone has been managed to have a future.

The thing that gets me most angry is that Mobile Telephone is about VOICE and so saying that Vodafone is too dependent on voice and needs to focus on Convergent products. I guess these guys need to talk to a few of the CTO's I know who will explain the economics of running two networks. What was planned for 3G at the time of the bidding war was that the new faster networks would allow operators to provide a better voice service with speach engines driving services.

2 comments:

renaissance chambara said...

Analysts move whichever way the latest fashion takes them, given that a company like Vodafone has to have a long-term plan and their investors and general hangers-on like analysts have a 90-day horizon or less there is bound to be tension.

One strategy I noticed that the analysts haven't suggested, but that would appeal to their investment bank buddies would be for Vodafone to greenmail Verizon and screw them on the equity holding or buy the lot as an LBO and finance the purchase with efficiency cuts and spinning off non-wireless parts of the business.

Digital Evangelist said...

Hi Ged,

Whilst I am no fan of the buy side Analyst my point was that you cannot judge Vodafone against O2 as they were not following the same startegy.

The problem with Vodafone having shared coffee with a few people since Friday is that they have become lazy. When Chris Gent was CEO the company looked at growing quickly buying partners. In the UK Vodafone therefore looked at being just a little better than the number two in the market rather than beinmg the best. Whilst this strategy was fine short term it is now coming home to roost.