Analyst: Vodafone stumbles on cost-cutting initiatives

Lack of progress with plans to cut operating expenses and get into network sharing deals has prompted analysts at Bernstein to downgrade Vodafone, having kept the stock on its "buy" list for the last three-and-a-half years.

"Big transformation appears to have stopped at the borders of the UK and Ireland," Bernstein analyst Robin Bienenstock said, according to the Financial Times. "Vodafone once again seems like a collection of national companies each with its own tactics, none overcoming the larger supra-industry issues."

Bernstein claims the operator is failing to make headway with plans to increase network sharing and remove the hefty costs associated with handset subsidies. The broker also highlighted the worsening economic trading conditions that could see Vodafone struggling to meet targets this year and next, according to the Financial Times.

This downgrade triggered a fall in the share price of Vodafone, with Bernstein adding that the shares could slide further, despite the "tantalising prospect" of a bid from U.S. partner Verizon Communications at some point.

The broker noted that "there has never been a better time for Verizon to make its move," but the company could struggle to raise the £50 billion needed to buy Vodafone out. "The likelihood of a deal between the two companies is very slim indeed," concluded Bernstein, according to the Financial Times.

Separately, earlier this week Vodafone confirmed a deal with Kuwait-based operator Zain to expand Vodafone's presence in the Middle East. Under the terms of the deal, Vodafone will work with Zain companies in Saudi Arabia, Bahrain, Kuwait, Jordan and Iraq to provide customers with communications services.

Zain will have access to Vodafone's devices and services in its home markets. Vodafone and Zain said they will work together to provide customers with enhanced network coverage, harmonised roaming rates across multiple countries with greater cost efficiencies and Zain will be able to use the Vodafone brand.

For more:
- see this Financial Times article (sub. req.)
- see this Guardian article
- see this Reuters article

Related Articles:
Vodafone Germany promises network revamp to boost quality
Vodafone to slash costs as European operations stutter
Vodafone splits Europe into northern, southern units
Vodafone CEO details 'Supermobile' strategy to mimic Amazon
Vodafone nears Middle East partnership deal with Zain

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