Vodafone's share price jumped ahead of its third quarter update planned for early February. The impetus behind this upswing, according to the Guardian, is heightened speculation the company will sell its 45 per cent stake in in Verizon Wireless, as well as Goldman Sachs suggesting that Vodafone would benefit from acquiring further cable assets.
Commenting on the likely third quarter performance, analysts at investment bank Espirito Santo said they expected organic service revenue growth to decline 2.4 per cent year-on-year, with Vodafone reporting particular weakness in Spain and Italy.
They added that this poor growth in Vodafone's European markets would likely stem any potential rating upgrade from the better than expected growth at Verizon Wireless, according to the Guardian.
However, while Goldman Sachs issued a note to investors lowering Vodafone's medium-term growth expectations, it has maintained the '"buy" rating on the operator, believing the company "has attractive potential to materially improve its structural position by acquiring cable assets, and realising substantial potential synergies." Last year Vodafone became more integrated with fixed communications via its bid to acquire Cable & Wireless Worldwide (C&WW) for £1.04 billion in cash.
Sanford C. Bernstein senior research associate John Keith sees a potential sale of the Verizon stake coming at an ideal time given the current high valuation given to Verizon Wireless However, he cautioned Verizon will likely not make an offer in the near-term.
"If you look at the trajectory where Vodafone is going, with European markets getting weaker, then perhaps it would make sense for Verizon to wait a little bit longer," he said, according to Reuters. "We don't expect a bid soon although there is likely to be a lot of noise around the idea."
Verizon Communications CEO Lowell McAdam recently reiterated that it is not in talks with Vodafone about taking full ownership of Verizon Wireless, despite market speculation that such a deal could happen soon.
The recent upsurge in rumours surrounding Vodafone selling its Verizon Wireless holding was triggered after hedge fund manager David Einhorn said he had already added to his Vodafone position. Einhorn maintains that the market undervalues the "clearly quite valuable" stake in Verizon, according Reuters.
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