It isn’t very often a mainstay FTSE 100 company sees its share price jump more than 8% in a single session, yet that is exactly what Vodafone (VOD) stock has done today.
Shares in the mobile network giant rallied 11.24p to 143.24p in trade on Friday, a six month peak.
That’s after (relatively) new chief executive Nick Read unveiled plans to cut Vodafone’s €27bn debt mountain by spinning-out its forest of mobile masts across Europe into a separate company, currently referred to as TowerCo.
Intriguingly this could mean an IPO (initial public offering) down the line, listing TowerCo on the stock market.
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TowerCo owns 61,700 towers in 10 countries, generating approximately €1.7bn revenue based on typical rents, according to analysts. That earns Vodafone €900m EBITDA (earnings before interest, tax, depreciation and amortisation) with about €200m capex (capital expenditure) needed annually.
These might seem dull assets yet they are highly valued by mobile operators, and investors.
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For example, Spain-listed specialist operator Cellnex trades on an enterprise value (EV) of 19-times current year EBITDA, a far more racy rating than utility-type mobile phone companies. Vodafone trades at around 4.2-times.
Matching Cellnex’s rating based on its €900m EBITDA would slap a rough €17bn EV on TowerCo, versus Vodafone’s rough €60bn EV.
The flip-side for Vodafone is that it would remove a chunk of cash flow generating assets from its balance sheet, and it would have to pay rent in future, impacting its own EBITDA going forward.
Even so, investors clearly like the idea. Vodafone seems to have dug down the back of the sofa for loose change and come up with a wad of £20 notes.
