Vodafone’s new investor looks passive-aggressive

2 minute read

The headquarters of Vodafone Germany are pictured in Duesseldorf September 12, 2013. REUTERS/Ina Fassbender

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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)

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

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Editing by Peter Thal Larsen, Streisand Neto and Oliver Taslic

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