Vodafone jumps as new CEO signals dividend is safe

LONDON • Vodafone Group plc’s shares jumped 7.1% after the mobile phone company’s new CEO unveiled stronger than expected results in a fiercely competitive market and kept the dividend stable while he tries to rein in debt.

Investors were already bracing for CEO Nick Read to end Vodafone’s policy of constant dividend growth after the US$22 billion (RM92.18 billion) takeover over Liberty Global plc’s German and Eastern European businesses stretched leverage at the world’s second-biggest mobile operator.

Newbury, England-based Vodafone, once a challenger to cumbersome former telecom monopolies, is now trying to fend off new low-cost mobile competitors while gearing up for a burst of spending to handle demand for faster networks.

Read said the dividend would be unchanged this year but said the board would consider higher payouts once debt returns to the lower end of a target range. Analysts at New Street Research said Vodafone would still boast a dividend yield of 9.2%, which was “too high to ignore”.

“Given expectations had been low, all of this is clearly positive, but the underlying trends for Vodafone still remain challenging, especially in Spain, Italy and South Africa,” New Street said in a research note.

Read, previously the company’s CFO who succeeded Vittorio Colao in October, is under pressure to chart a vision that can revive Vodafone’s flagging stock, which has been trading at its lowest since 2009. — Bloomberg