“The jury is still out on whether that can turn around,” says Karen Egan, head of telecoms at Enders Analysis. Analysts also expect Vodafone to have to cut its dividend, which may prompt anguish among investors.
Karen Egan at Enders Analysis described the sale as a “bold move” that would leave Vodafone’s European operations dominated by the UK and Germany.
She added: “I’m somewhat surprised that they’re leaving Italy altogether given their history there but it’s the right move.”
Vodafone’s shares have continued to slide this year, reaching multi-decade lows. The group is not managing to get full valuations for its assets. Spain was distinctly underwhelming. Swisscom is paying 5.5 times last year’s Italian ebitda adjusted for lease payments. European telecoms incumbents trade at 7.2 times on the same basis, according to Karen Egan at Enders.
Karen Egan, head of mobile at Enders Analysis, described the telecoms group as “highly levered”.
She added: “In a world of low rates it made absolute sense to lever everything up as much as you could get away with. With rates now rising, the tolerance for that level of leverage is lower.”
Other witnesses in the committee’s evidence session, including Enders Analysis, have played down concerns about price rises, saying research had not found a correlation between pricing levels and the number of network operators.
Joseph Teasdale, head of tech at Enders Analysis, said that shorter videos ultimately support a lower ad load overall, and that the vertical scrolling nature of most short-form video products is a less advertising-friendly environment. “It may be that we’re just earlier along the monetisation curve, but my guess would be that it never makes as much money as long-form,” said Teasdale. A recent report from Enders recommended that news publishers should view activity on TikTok as a “strategic cost” to build brand awareness, rather than a revenue source.
The trouble is, publishers need every penny they can get right now. Publishing groups are announcing layoffs every week at the moment. Short-form struggles aren’t the biggest problem for publishers right now – Enders’ Joseph Teasdale said it “pales in comparison” to the more fundamental issue that they by-and-large haven’t found a business model that works for digital media.
Karen Egan, a senior telecoms analyst at Enders Analysis, said Liberty Global had been “very wily” investors in the past but there was “less coherence” to its current investments.
“Given that uncertainty about the value they are adding, it is somewhat inevitable that the shares would trade at a discount,” she added. “There’s a whole lot of complexity in their holdings, including debt at the company level and cash at the parent level, and investors will apply a discount when it requires them to put a whole lot of effort in to understand the whole.”
“There is a console-specific problem in the games industry: nobody is buying an Xbox, PS5 has peaked at the cost of significant discounting and everyone is waiting for Switch 2.0,” said Gareth Sutcliffe at Enders Analysis. “Consoles have proven that they are not a growth model for gaming — they top out at a very clear number.”
Enders Analysis estimates global gaming revenue rose by less than 1 per cent last year to $184bn, a slower rate than inflation. Enders’ researchers said in a recent report that 2024 was set to be a “bumpy and uncomfortable year across the industry” as “revenue growth is likely to be flat for the next 12-24 months”.
"Shareholders calling for a break-up of the company to unlock shareholder value might feel that their cause is set back, with E& on the board, given E&’s ambition to become a global telecom and technology player," said Karen Egan, telecoms expert at Enders Analysis, who added that the appointment was unlikely to pose security risks.