Vodafone tries new tack to woo investors
Mobile phone giant will return an extra $5.6 billion to investors and hike its dividends.
The U.K.-based company, under pressure from slowing growth in Europe and rivals with new technologies that link mobile and fixed-line devices, said it is paying out 60 percent of earnings in dividends and will keep future payouts high.
The extra cash for investors helped to overshadow Vodafone announcing the biggest loss in U.K. corporate history as a result of accounting writedowns, as well as details of a new strategy that will see it ax 400 head-office jobs and enter the fixed-line broadband Internet market.
"We're very happy with the approach they have taken with the dividend," said Richard Marwood, a fund manager at AXA Investments. "You are getting a sixth of the company's market capitalization being returned to you within the next year."
Vodafone, which had already announced plans to return $11.3 billion to shareholders following the sale of its Japanese unit, said it would raise this total to $16.9 billion.
Vodafone Chief Executive Arun Sarin has come under pressure from investors and within his own board to spell out a strategy to cope with slower growth in markets such as Germany and Italy where mobile phone ownership is rife and competition is intense.
The company said it continued to expect modest revenue growth in Europe, but unveiled a plan to cut costs including 400 job cuts at its corporate center and outsourcing some IT activities.
Vodafone's "pure-play" mobile operation has come under fire at a time when fixed-line and mobile businesses are converging into a cheaper, single service that works across both networks.
The company said Tuesday it had responded with its recently created New Businesses unit and announced plans to launch a series of products including high-speed Internet access in Germany.
Vodafone said it will sell businesses that cannot make a strong enough return, but added it remained a happy shareholder in U.S. group Verizon Wireless. Speculation is rife that Vodafone will sell its 45-percent in Verizon Wireless to its joint venture partner Verizon Communications.
Some investors had feared Vodafone, whose takeover of Germany's Mannesmann in 2000 was the largest in history and contributed--along with the Japan sale--to Tuesday's goodwill writedowns, might look to offset slower growth in Europe by making acquisitions in emerging markets or buying a fixed-line operator.
But the company said it expected a lower level of merger and acquisition activity in the future.