In recent months, various sectors and themes, such as electric vehicles, alternative energy and "staying at home and working from home", have received increasing attention from investors.
Since Apple & # 39; s (NASDAQ 🙂 recent iPhone event, 5G, the next generation of wireless technology, has come into the spotlight.
According to the British Government, 5G
"Brings more speed, capacity and functionality to mobile services, opening new opportunities for consumers, businesses and public services."
Although 5G is still early in many countries, analysts agree it will revolutionize our communications. For some consumers, their smartphones may already be benefiting from the 5G rollout, which means faster connectivity. In addition to a 5G phone, customers need a 5G subscription and be in an area covered by a 5G network.
Investors want to better understand stocks and stocks (ETFs) that will play a role in this disruptive technology. Today we discuss UK-based global telecom group Vodafone (LON 🙂 (NASDAQ :).
How Recent Revenue Came In
The index member is one of the companies operating the UK's mobile communications infrastructure. The company is continuously updating the availability of 5G in the UK and other European locations. It has launched 5G services so far at 57 locations in the UK and nearly 200 locations in Europe.
On July 24, Vodafone released the trade update for FY21. In the first quarter, organic sales declined 1.3% year-on-year (yoy). Management pointed out the negative impact of the pandemic.
Investors were pleased to see mobile customer loyalty improving for the seventh consecutive quarter. Another key point in the report was that Vodafone will spin off its mobile tower company, Vantage Towers (formerly TowerCo) in early 2021.
CEO Nick Read said:
"We have seen … increased use of voice and data, along with record acquisitions from NGN broadband customers in Europe. I am also pleased to introduce Vantage Towers as Europe's leading tower infrastructure company & # 39; [19459009"]. "
The IPO is expected to take place in Frankfurt. Vodafone will retain a majority stake in the company.
Germany Leads Vodafone's Growth
Potential investors would like to know that Germany is now Vodafone's largest market. The focus on Germany follows the 2019 acquisition of Liberty Global's (NASDAQ 🙂 European assets, which extended to Germany, the Czech Republic, Hungary and Romania.
It was Vodafone & # 39; s largest takeover deal in two decades. In fact, the UK, its home market, currently generates only about 15% of total revenues. The rest of the revenue comes from the remaining markets that are geographically diversified.
It should be noted that the deal with Liberty Global has meant considerable indebtedness for Vodafone. At the beginning of 2019, Vodafone's dividend yield was more than 9%. However, the high debt burden forced the board of directors to reduce its payout by 40% in May 2019.
The current stock price supports a dividend yield of more than 7%. On Oct. 22, UK-domiciled shares closed at 108.76p ($ 14.5 for US-domiciled shares). Since the beginning of the year, VOD stock has fallen by about 26%. The forward P / E, P / S and P / B ratios are 17.39, 0.80 and 0.53, respectively.
Given the volatility in broader markets and the uncertainty associated with Brexit, Vodafone may still come under pressure in the short term. A further decline of about 5% -7% would improve the margin of safety for long-term investors. Value investors may want to put the stock on their radar.
Bottom Line
Creating growth opportunities in a mature industry such as telecommunications services requires proactive management, which we believe Vodafone has. Management is working on integrating the various mergers while saving costs. While there may still be hurdles ahead for the group, the upcoming 5G revolution is likely to give Vodafone the wind in its sails.
Other UK and Continental European based companies likely to play a leading role in the 5G rollout in Europe include BT Group (LON 🙂 largest UK telecom operator, Swedish networks company Ericsson (BS 🙂 (NASDAQ 🙂 and Finland-based Nokia (NYSE :).
Buy-and-hold investors may not immediately see the positive effects of the 5G strategy on bottom line. Therefore, some patience may be required on the part of the shareholders.
