Vodafone’s new investor looks passive-aggressive

LONDON, May 16 (Reuters Breakingviews) - A cryptic new name isn’t the only puzzling thing about e& (ETISALAT.AD). The Gulf-based telecom giant formerly known as Etisalat has splurged $4.4 billion on a 9.8% stake in struggling Vodafone (VOD.L). For now Chief Executive Hatem Dowidar says he’s happy just to be a passive minority investor. The company doesn’t want board seats and has backed Vodafone boss Nick Read and his strategy read more . But with activist shareholder Cevian Capital pushing for changes including a possible breakup of the UK-based operator, such passivity may not last.

With $600 million of net cash on its books, the $75 billion e& has money to spend. And Vodafone looks cheap. Including debt it’s valued at just 5 times expected EBITDA for next year, half the multiple investors attach to its new shareholder. Poor performance justifies the discount, though. Vodafone’s top line is growing at an anaemic 1% a year and its EBITDA margin is static at 33%. If Dowidar sees sense in Cevian’s thinking, it’s a short switch from passive to aggressive. (By Ed Cropley)

Follow @Breakingviews on Twitter

(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

Capital Calls - More concise insights on global finance:

Coinbase is conjoined to crypto read more

Bayer’s weedkiller saga also taints U.S. justice read more

India can concede more ground on its insurance IPO read more

Cheap home loans raise Turkey’s inflation roof read more

Nintendo plays a safer, shorter game than Sony read more

Our Standards: The Thomson Reuters Trust Principles.