VOD Jan 2020 20.000 call

OPR - OPR Delayed Price. Currency in USD
0.3800
0.0000 (0.00%)
As of 2:18PM EST. Market open.
Stock chart is not supported by your current browser
Previous Close0.4300
Open0.4300
Bid0.3500
Ask0.3800
Strike20.00
Expire Date2020-01-17
Day's Range0.3600 - 0.4400
Contract RangeN/A
Volume676
Open Interest14.84k
  • Bloomberg

    Vodafone Idea, Bharti Surge on Plan to Raise Mobile Tariffs

    (Bloomberg) -- Shares of Vodafone Idea Ltd. and rival Bharti Airtel Ltd. rallied after the wireless carriers said they planned to raise tariffs starting next month, the first increase since the entry of billionaire Mukesh Ambani into India’s telecommunications market in 2016 triggered a price war.Vodafone Idea surged as much as 30% in Mumbai on Tuesday, while Bharti Airtel rallied as much as 6.6%. Reliance Industries Ltd.’s shares rose more than 3% to a record on optimism Reliance Jio Infocomm Ltd. will also benefit from higher tariffs. “Mobile data charges in India are by far the cheapest in the world even as the demand for mobile data services continues to grow rapidly,” Vodafone Idea, formed by the merger of Vodafone Group Plc’s local unit with billionaire Kumar Mangalam Birla’s Idea Cellular Ltd., said in a statement late Monday. Higher rates will become effective Dec. 1, it said.Separately, a Vodafone Idea spokesman declined to disclose details about the possible tariff increase and plan details. The move comes after the wireless carrier reported the worst quarterly loss in Indian corporate history last week. The announcement of the increase was followed by Bharti Airtel, which also said it will raise phone rates from next month.Vodafone Idea last week took a one-time charge related to a $4 billion demand from the government, leading to a net loss of 509 billion rupees ($7.1 billion) in the September quarter. Saddled with about $14 billion of net debt, Vodafone Idea is fighting for survival after India’s top court last month ordered it and others including Bharti Airtel to pay fees that the government said were due from prior years.Indian telecom companies have been faced with high debt and low prices especially after the entry of Jio. That drove some to bankruptcy and led to the merger of others such as Vodafone with Idea. The acute stress in the sector has been acknowledged by all stakeholders and a high-level government panel is looking into providing appropriate relief, Vodafone Idea said Monday.“The key will be Jio’s response to the price hike. We think Jio could likely follow,” Jefferies analysts wrote in a note. Reliance has potential to gain from already above average valuation, thanks to the possibility of higher telecom tariffs and its debt reduction plans, Morgan Stanley analysts wrote.(Adds Reliance shares in second paragraph, analysts comments in last)To contact the reporters on this story: P R Sanjai in Mumbai at psanjai@bloomberg.net;Swansy Afonso in Mumbai at safonso2@bloomberg.netTo contact the editors responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net, Abhay Singh, Ravil ShirodkarFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • In the Age of 5G, the Hottest Telecom Assets Are ... Towers
    Bloomberg

    In the Age of 5G, the Hottest Telecom Assets Are ... Towers

    (Bloomberg Opinion) -- There are plenty of reasons Deutsche Telekom AG and Vodafone Group Plc make for uneasy bedfellows. But if Europe’s biggest telecommunications firms can overcome their differences, they would benefit from forging a strong alliance for one of their biggest cost centers: towers.The structures on which mobile operators install their antennas have generated a flurry of dealmaking as valuations soar and European carriers sense an opportunity to reduce debt and costs. By some estimates, towers account for a third of total capital expenditures. Since July, more than $8 billion of deals have been announced in Europe.Sexy they are not. Yet towers are critical vertebrae for wireless networks, and are ever more in demand with the advent of 5G networks. The new technology, which promises to transmit bigger gobs of data at faster speeds, will depend on antennas with a shorter range than previous generations because of the spectrum of bandwidth being used. That means more towers will be needed to post more antennas at closer intervals to power a network, making it increasingly attractive for operators to share them.With that in mind, Vodafone is already separating out its towers arm. An umbrella company will hold the stakes in its U.K. joint venture with the local unit of Madrid-based Telefonica SA, as well as a combination in Italy with Telecom Italia SpA’s Inwit subsidiary, pending regulatory approval. Options are being evaluated for Vodafone’s similar assets across the rest of Europe. Germany is at the top of the list.Just last week, Deutsche Telekom, Vodafone and Telefonica agreed to work together to build as many as 6,000 mobile sites in a bid to cut costs. They could do more, and merging Vodafone’s towers with those of Deutsche Telekom, the larger rival, would make the most sense for both parties. The former German national carrier has intimated it’s open to “possible scenarios,” especially given the German government’s ambitious target of having 98% of German homes, every highway and all federal roads equipped with download speeds of 100 megabits per second by the end of 2022.The timing isn’t perfect. The two firms’ rivalry is intensifying in Germany after the British firm agreed to buy Liberty Global Plc’s local cable assets for 19 billion euros ($16.5 billion). In trying to stymie the deal, Deutsche Telekom Chief Executive Officer Tim Hoettges questioned the implications that foreign ownership of major television assets would have for German democracy.But a towers tie-up could yield three major benefits: It would reduce debt, underpin an improved sum-of-the-parts valuation, and cut exposure to major capital expenditures over the next decade. Hoettges teased the idea at a conference in Barcelona last week, saying, “I’m ready for an IPO, I’m ready for a partnership — if we find one.”Mimicking Vodafone’s Italian deal would be sensible. There, Vodafone had the more valuable assets, so it received a 2.1 billion-euro cash payment and a 37.5% stake in the firm, Inwit. Telecom Italia has a holding of the same size, with the remaining 30% publicly traded.In Germany, Deutsche Telekom would expect to receive the cash payment. It has 9,000 towers, and Vodafone just 4,000. And since towers companies can sustain higher levels of debt, that money needn’t come from Vodafone itself. The new firm’s higher leverage capacity might be able to fund the deal.With the cash, Deutsche Telekom could reduce its net debt, which is set to jump significantly when U.S. subsidiary T-Mobile U.S. Inc. seals the $58 billion acquisition of Sprint Corp., expected early next year. That will push debt above Deutsche Telekom’s target ratio, Bloomberg Intelligence analyst Aidan Cheslin estimates.The value of the new towers company could approach 15 billion euros, based on earnings estimates and peer valuations. By selling a minority stake to the public market, Vodafone and Deutsche Telekom would be able to raise more capital and highlight value of the towers businessThe main reason not to merge the operations — being able to brag your network is better than someone else’s — is meanwhile eroding, given the network-sharing agreement reached last week.The biggest hurdle to a deal might be antitrust concerns. But other deals that seemed a gamble — such as Deutsche Telekom merging its Dutch business with the that of Swedish rival Tele2 AB — have been cleared. The pace of towers combinations is accelerating. France’s Orange SA has hinted it’s also evaluating its infrastructure assets, and will reveal more details Dec. 4. Europe’s two biggest telecoms giants should do so too, and together.To contact the author of this story: Alex Webb at awebb25@bloomberg.netTo contact the editor responsible for this story: Melissa Pozsgay at mpozsgay@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • Benzinga

    Analyst: Vodafone Weakness Likely Tied To Corbyn's Proposal To Nationalize Broadband Service

    Jeremy Corbyn, leader of the U.K.'s Labour Party, plans to nationalize British Telecom's Openreach broadband network and provide free internet if the party wins power.  The proposal is impacting shares ...

  • Reuters

    EXPLAINER-What's behind Labour's plan to overhaul BT and the British broadband network?

    Britain's opposition Labour Party says if it wins the Dec. 12 election it will nationalise BT's broadband network and provide free internet for all within a decade, a radical election pledge to roll back decades of private ownership. The UK's biggest broadband and mobile phone provider was the flagship of Conservative Prime Minister Margaret Thatcher's policy of selling state-owned assets, a political revolution that she said would improve efficiency and "spread the nation's wealth among as many people as possible".

  • Jeremy Corbyn Wants to Nationalize the Internet
    Bloomberg

    Jeremy Corbyn Wants to Nationalize the Internet

    (Bloomberg Opinion) -- Jeremy Corbyn’s Labour Party is behind in the polls for the U.K. election so it’s unsurprising that he’s chucking out more giveaways to voters. The policy to nationalize BT Group Plc’s fixed-telecoms networks business and provide free fiber broadband to every British household is a humdinger nonetheless.Of course, the chances of this becoming reality are slim given that Corbyn’s best hope of becoming prime minister is a coalition with more moderate political parties. Yet the idea has stimulated even more debate than Labour’s previous plans to re-nationalize the railways and the energy utilities, so it’s at least worth thinking about. Taking it at face value, the policy would be a huge mistake that would achieve the opposite of its stated aim of accelerating Britain’s sluggish rollout of fiber broadband.First, there’s the cost. A Labour government would add 15 billion pounds ($19 billion) to an existing 5 billion pound broadband spending pot, according to Shadow Chancellor John McDonnell. Even assuming that would cover the required capital expenditure — a big assumption — it would cost at least the same again to nationalize Openreach, BT’s networks division.McDonnell says the state would pay for the acquisition by giving BT’s shareholders government bonds as compensation. Yet why would investors, especially those outside the U.K. protected by treaties against asset expropriation, exchange an 8.1% annual dividend yield from their BT stock for the less than 1% returns from U.K. gilts? The network spending itself would be funded by an increased tax on the likes of Facebook Inc., Alphabet Inc. and Amazon.com Inc. But the G-20 will probably adopt new international tax standards next year to try to curb Big Tech’s avoidance tactics. So a Labour government might not even be able to whomp up these levies without breaching the new guidelines.Then there’s the speed of rolling out the networks. While the U.K. is well behind the pace on high-speed broadband rollout (it’s 10th in the European Union’s 2019 connectivity rankings), a tortured nationalization process isn’t the answer. BT would have no incentive to keep investing during that period.The same’s true for private competitors such as John Malone’s Virgin Media, Vodafone Group Plc and Comcast Corp.’s Sky. Increased competition has at least accelerated the pace of the rollout: The proportion of homes with fiber access has doubled in two years.Infrastructure investors have also been attracted by the returns promised by fiber, prompting a flurry of investment from KKR & Co., Macquarie’s infrastructure fund and Goldman Sachs Group Inc. McDonnell’s comments have certainly caused some consternation. TalkTalk Telecom Group Plc. said it had paused talks to sell a fiber project, for which Goldman-backed CityFibre Ltd. was the lead bidder. Should Labour ever get the chance to offer free broadband to everyone through a state-owned provider, tens of thousands of private sector jobs would be jeopardized. How would other companies be able to compete?And full-fiber broadband might not even really be necessary. The adoption of next-generation 5G mobile networks promises the ability to transmit far more data at far greater speeds. That would make fiber to every home redundant in parts of the country.There are better and more thoughtful ways to get fiber installed sooner: Making it easier to get permits to build the network; permanently reducing business tax rates for new fiber; and making it obligatory for customers to accept fiber upgrades. If McDonnell is willing to hand over 15 billion pounds to BT shareholders to snap up Openreach, why not use the funds to subsidize the rollout directly?To contact the author of this story: Alex Webb at awebb25@bloomberg.netTo contact the editor responsible for this story: James Boxell at jboxell@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • Vodafone India Unit Pleads for Relief After $7 Billion Loss
    Bloomberg

    Vodafone India Unit Pleads for Relief After $7 Billion Loss

    (Bloomberg) -- After posting the worst quarterly loss in India’s corporate history, Vodafone Group Plc’s besieged local venture is appealing for urgent relief from the government to help avert a collapse.Vodafone Idea Ltd. took a one-time charge related to a $4 billion demand from the government for overdue fees, leading to a net loss of 509 billion rupees ($7.1 billion) in the three months through September, the company reported Thursday after the market closed.Formed by the merger of the U.K.-based firm’s local unit with billionaire Kumar Mangalam Birla’s Idea Cellular Ltd., hasn’t reported a profit since the deal was announced in 2017.“The company’s ability to continue as going concern is dependent on obtaining the reliefs from the government,” Vodafone Idea said in a statement late Thursday. It is “in active discussions with the government seeking financial relief,” it said.India to Consider Relief Measures for Its Ailing Telecom SectorSaddled with $14 billion of net debt, Vodafone Idea is fighting for survival after India’s top court last month ordered it to pay fees the government said were due from prior years. Vodafone Chief Executive Officer Nick Read told reporters this week in London that the situation was “critical” and unless India eases off on its demands, the venture may be headed for liquidation.Rival Bharti Airtel Ltd. also posted a record net loss on Thursday after market hours, highlighting the financial stress of Indian operators stuck with high levels of debt while facing a price war unleashed by billionaire Mukesh Ambani’s Reliance Jio Infocomm Ltd. and more recently, the adverse court verdict on fees.Bharti Airtel and Vodafone Idea shares gained Friday in Mumbai trading on optimism the government may provide help for the companies and as operating results showed some strength.A government panel is considering deferring payments due by March 2021 and March 2022, an official said last month. It will also consider cutting spectrum fees and other charges, said another official, who asked not to be identified, citing disclosure rules.Bharti Airtel’s shares rose as much as 9.1% Friday, while its 5.65% perpetual notes also advanced. The company’s “mobile performance was robust,” and grew from the preceding quarter, Saurabh Handa, an analyst with Citigroup Inc. in Mumbai wrote in a report. Vodafone Idea climbed as much as 10%, after dropping as much as 19% earlier in the day.In its Oct. 24 verdict, the Supreme Court of India ruled in favor of the government’s method of calculating operators’ revenue, a decision that means carriers must pay about $13 billion combined -- mostly license and spectrum fees built up over years. Bharti Airtel owes $3 billion, while Reliance Jio needs to pay 130 million rupees, the least, since it has only been in business since 2016.The finance ministry won’t back down from collecting the amount, which needs to be paid within three months as per the court order, an official with knowledge of the matter said this month.The demands comes as Vodafone Idea and Bharti Airtel faces intense competitive pressure from Jio, which swept into the No. 1 spot by users earlier this year. The upstart controlled by Asia’s richest man barreled into India’s wireless market three years ago with free calls and cheap data, acquiring about 380 million users.Jio’s entry drove some incumbents to bankruptcy, while others like Vodafone and Idea merged. But the pressure on earnings continued.Bharti Airtel, whose parent counts Singapore Telecommunications Ltd. as an investor, had a net loss of 230.4 billion rupees for three months ended September, it reported Thursday. Billionaire Sunil Mittal is also one of Bharti Airtel’s biggest investors.Losses at Bharti Airtel forced SingTel to also make such a hefty provision that it slipped into a quarterly loss for the first time.Vodafone Idea said Thursday it took a one-time charge of 256.8 billion rupees.‘Fragile State’Bharti Airtel continues to engage with the government, Gopal Vittal, the company’s chief executive officer for India and South Asia operations, said in a statement.“We are hopeful that the government will take a considerate view in this matter given the fragile state of the industry,” said Vittal.To ease the pressure on its Indian venture’s finances, Newbury, U.K.-based Vodafone, which owns about 45%, has said it wants a two-year delay on spectrum payments and lower license fees and taxes. It’s also called for the bandwidth fees demanded by the court to be spread over 10 years.“If you don’t get the remedies being suggested, the situation is critical,” Vodafone CEO Read said on Nov. 12. “If you’re not a going concern, you’re moving into a liquidation scenario -- can’t get any clearer than that.”Opt For InsolvencyEarlier, Read said Vodafone would refrain from plowing more money into India. The other venture’s other partner, Birla, won’t inject fresh equity and will opt for insolvency if the government doesn’t provide relief, the Economic Times reported Thursday, citing people it didn’t identify.For its part, Reliance Jio has insisted its two smaller rivals can and should pay up on time.India had a dozen independent carriers two years ago, and just three non-state operators are left standing today. The only clear winner has been Jio, which is backed by the deep pockets of Ambani’s sprawling energy-to-petrochemicals empire.(Updates with gain in shares in third paragraph)To contact the reporter on this story: P R Sanjai in Mumbai at psanjai@bloomberg.netTo contact the editors responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net, ;Arijit Ghosh at aghosh@bloomberg.net, Dave McCombs, Bhuma ShrivastavaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Reuters

    UPDATE 7-UK's Labour plans high-speed connection to voter hearts with BT nationalisation

    Britain's opposition Labour Party plans to nationalise BT's broadband network to provide free internet for all if it wins power, making a radical election pledge to roll back 35 years of private ownership that caught both the company and its shareholders by surprise. Labour's proposed overhaul of the telecoms infrastructure, an addition to its already broad nationalisation plan, would be paid for by raising taxes on tech firms such as Alphabet's Google, Amazon and Facebook and using its Green Transformation fund. The announcement by Labour, which is currently lagging Prime Minister Boris Johnson's Conservatives in opinion polls ahead of the Dec. 12 election, sent BT's shares down as much as 3.7%, wiping nearly half a billion pounds off its market value.

  • Telecom Italia aims to sell stake in Vodafone Italian tower tie-up - CEO
    Reuters

    Telecom Italia aims to sell stake in Vodafone Italian tower tie-up - CEO

    Telecom Italia (TIM) plans to sell a stake in the mobile mast business it is creating in Italy with rival Vodafone to infrastructure funds, the Italian group's chief executive said on Thursday. The two companies agreed in July to merge their Italian mobile assets under the INWIT business that is currently 60%-owned by TIM. The deal is awaiting European Union antitrust approval and is expected to wrap up in the first half of 2020, INWIT's chief executive said last week.

  • Telecom Italia aims to sell stake in Vodafone Italian tower tie-up: CEO
    Reuters

    Telecom Italia aims to sell stake in Vodafone Italian tower tie-up: CEO

    Telecom Italia (TIM) plans to sell a stake in the mobile mast business it is creating in Italy with rival Vodafone to infrastructure funds, the Italian group's chief executive said on Thursday. The two companies agreed in July to merge their Italian mobile assets under the INWIT business that is currently 60%-owned by TIM. The deal is awaiting European Union antitrust approval and is expected to wrap up in the first half of 2020, INWIT's chief executive said last week.

  • The Zacks Analyst Blog Highlights: Lloyds Banking, Unilever, BP, RELX and Vodafone
    Zacks

    The Zacks Analyst Blog Highlights: Lloyds Banking, Unilever, BP, RELX and Vodafone

    The Zacks Analyst Blog Highlights: Lloyds Banking, Unilever, BP, RELX and Vodafone

  • Vodafone Idea makes $7 billion loss after provisions for government dues
    Reuters

    Vodafone Idea makes $7 billion loss after provisions for government dues

    Indian mobile carrier Vodafone Idea on Thursday reported the biggest quarterly loss in India's corporate history after making provisions for outstanding government dues. Vodafone Idea, made up of the local unit of Vodafone Group Plc and billionaire Kumar Mangalam Birla's Idea Cellular, reported a consolidated net loss of 509 billion rupees ($7.13 billion) in the second quarter to September. The company took a charge of 256.78 billion rupees for the quarter after India's Supreme Court last month upheld a demand by the telecoms department that wireless carriers pay 920 billion rupees in overdue levies and interest.

  • InterDigital Invests $50K for Mobile Edge Computing Research
    Zacks

    InterDigital Invests $50K for Mobile Edge Computing Research

    InterDigital (IDCC) is committed to fostering edge computing research and development opportunities to boost future technologies in IT and telecommunications industry.

  • Telefonica COO supports consolidation in Spanish telecom crowd
    Reuters

    Telefonica COO supports consolidation in Spanish telecom crowd

    A top official at Telefonica said on Wednesday he would support consolidation in Spain's fiercely competitive telecommunications market, where takeover speculation has been rife. The telecoms market in the euro zone's fourth-largest economy has become ever-more crowded, squeezing profits and prompting British peer Vodafone to propose cutting up to one fifth of its workforce there. "We would be supportive of consolidation of the Spanish market if that scenario were to take place," Chief Operating Officer Angel Vila told the Morgan Stanley European Technology, Media and Telecoms conference in Barcelona.

  • 5 Stocks to Profit as U.K. Economy Hits Decade Low in Q3
    Zacks

    5 Stocks to Profit as U.K. Economy Hits Decade Low in Q3

    Brexit uncertainty hurts Britain's labor market, manufacturing sector and trade prospects, leading to slowest annual growth rate of the U.K. economy in nearly a decade.

  • India Imperils Foreign Investment With Telecom Cash Grab
    Bloomberg

    India Imperils Foreign Investment With Telecom Cash Grab

    (Bloomberg Opinion) -- For Kumar Mangalam Birla’s textile-to-telecom empire, adversity is a 100-year-old companion. In 1919, when the Indian businessman’s great-grandfather wanted to start a jute mill, the dominant British firm, Andrew Yule & Co., bought all the surrounding Calcutta land. The Imperial Bank, the forerunner of today’s State Bank of India, initially refused Birla a loan.(1)The government of post-independence India stymied the Birla conglomerate with kindness. Soviet-style planning and state socialism protected the family’s legacy licensed firms by keeping competition out. But they inhibited growth. Birla’s father, Aditya Vikram, went to Thailand, Indonesia and the Philippines because he wasn’t allowed to expand at home. “I for one fail to see where the concentration of economic power is: with the big business houses or with the government?” he wondered in 1979. Fast forward 40 years, and the 52-year-old current chairman of the group would be justified to reprise his late father’s frustration. The liberalizing spirit of the 1990s Indian economy has lost much of its force. After dismantling the license raj, a system of strict government-controlled production, and encouraging capitalism, New Delhi is gripped once more by a feverish statism that’s making Birla’s shareholders nervous. The slide began before Prime Minister Narendra Modi came to power in 2014, and was one of the reasons why businesses backed his call for “minimum government, maximum governance.” But five years later, relations between private enterprise and the government have turned even testier.Take telecommunications, the main source of investors’ anxiety. Ever since India opened up the state-run sector in the 1990s, the Aditya Birla Group has been an anchor investor. Partners and rivals like AT&T Inc., India’s Tata Group, and Li Ka-shing’s CK Hutchison Holdings Ltd. came and went, but Birla remained. Currently, the group owns 26% of the country’s largest mobile operator by subscribers, Vodafone Idea Ltd., with the British partner controlling 45%. An Indian court last month directed this bruised survivor of a nasty price war to pay 280 billion rupees ($4 billion) in past government fees, interest and penalties. Overall, India wants to gouge its shriveled telecom industry of $13 billion. The fund-starved government expects operators to cough up more at 5G auctions next year. How long can the Birla boss hang in? With Vodafone Idea saddled with losses and $14 billion in net debt, should he even bother?It’s doubtful whether partner Vodafone Group Plc will linger. This isn’t the first time it has been clobbered by unreasonable government demands. In 2012, India retrospectively changed its tax law to pursue a $2.2 billion withholding tax notice against the U.K. firm. Seven years later, that dispute is far from resolved, and the unit has now been slapped with a new bill.In its half-yearly earnings reported Tuesday in London, Vodafone fully wrote down the book value of its India operations, and warned that the unit could be headed for liquidation. Vodafone’s 42% stake in a separate cellular tower company in the country, once sold, will get used largely to pay off the loan it took to pump capital into the main telecom venture. After that, the U.K. firm will have a little over $1 billion left to support Vodafone Idea, according to India Ratings & Research, a unit of Fitch Ratings. However, the India business would be required to find $5.5 billion just for interest- and spectrum-related payments until March 2022.Will Birla step into the breach?Out of the Indian group’s 26% in Vodafone Idea, about 11.6% is held by Grasim Industries Ltd., and another 2.6% is owned by Hindalco Industries Ltd. Hindalco, among the world’s largest aluminum makers, is battling weak metals demand and a complicated takeover of the U.S.-based Aleris Corp. The bulk of the burden of a telecom rescue — should there be one — would fall on Grasim. It acts as a holding company for Birla’s cement and financial services businesses, apart from directly owning factories that churn out wood-based fiber and chemicals like caustic soda used in soap and detergent.Mumbai-based Emkay Global Financial Services says that in the worst-case scenario, where the government doesn’t back down and Birla refuses to fold his telecom cards, a rescue mounted by by Grasim could cost it 187 rupees per share. If Birla refrains from throwing good money after bad, the value of everything else Grasim owns net of debt is 1,126 rupees a share, or 47% more than the current stock market price. Clearly, the overhang of the Vodafone uncertainty is playing on investor psyche. Once the U.S.-China trade war stops making global textile markets jittery, fiber prices will firm. Grasim, in investors’ view, is better off spending $2 billion on new capacities in fiber, chemicals and cement than wasting any more money trying to salvage the telecom venture.The Indian government should see the folly of effectively turning the telecom industry into a two-horse race between Reliance Jio Infocomm Ltd., controlled by Mukesh Ambani, the richest Indian, and Bharti Airtel Ltd., which, too, is staggering under a mountain of debt. As IIFL Securities put it, bankruptcy of Vodafone Idea would hurt all stakeholders. Vodafone and Birla would lose control, the government would forgo $1.7 billion in annual spectrum revenue and banks would take losses on their $4 billion-plus exposure.Such an outcome would cast a serious doubt on the ability of private entrepreneurs to flourish, especially if they — like Birla or Amazon.com Inc. boss Jeff Bezos — happen to find themselves in competition with Ambani in a tightly regulated industry. Future investors will think twice. The rift between the government and business wasn’t Modi’s creation, but to allow the mistrust to turn into a chasm would be one of his administration’s gravest mistakes.(1) See, “Aditya Vikram Birla: A Biography” by Minhaz Merchant, Penguin India, 1997To contact the author of this story: Andy Mukherjee at amukherjee@bloomberg.netTo contact the editor responsible for this story: Patrick McDowell at pmcdowell10@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • France's Bad Boy of Telecoms Joins the Geriatric Set
    Bloomberg

    France's Bad Boy of Telecoms Joins the Geriatric Set

    (Bloomberg Opinion) -- Xavier Niel is supposed to be the bad boy of French telecoms. He never finished college, once ran an online sex-chat service, and shook up incumbents like Orange SA with cheap pricing when he launched Free Mobile in 2012.That makes one element of his push to extend control over Free’s parent Iliad SA particularly surprising: the implicit admission that the Paris-based company is becoming just like any other boring telecom company. It's an overdue acknowledgement of market realities.It all comes down to the dividend. Mobile carriers have appealed to investors over the past decade not for their growth prospects but their generous dividend payouts. European telecommunications firms will have an average dividend yield of 5% this year, according to estimates compiled by Bloomberg. That compares with the 3.3% average of the broader Stoxx 600 Index of European companies.Iliad has differed from the crowd. Its 12-month yield has averaged 0.8% since 2009. That’s because it promised growth — the stock climbed almost three-fold between 2009 and 2017. But the past two years have been a different story. Before today, the shares had fallen 63% from their 2017 peak as French rivals reclaimed market share from the low-cost upstart.On Tuesday, Niel announced plans to boost his holding in the firm by as much as 20 percentage points. The complicated structure will see Iliad buy back up to 1.4 billion euros ($1.5 billion) of stock for 120 euros per share, then issue new shares of an equivalent amount that Niel has pledged to buy, in a rights issue to which other shareholders can also subscribe. At the same time, Iliad announced it would increase the dividend by a chunky 189% to 2.60 euros, bringing the yield to more than 2%. That’s still very much at the low end of its peers but a substantial change in policy, particularly at a time when the region’s giants — Vodafone Group Plc and Deutsche Telekom AG — are cutting their dividends as they anticipate increased spending on 5G networks.For Niel, it’s a canny way of using the company’s stronger balance sheet to extend his control. Iliad is expecting proceeds of more than 2 billion euros from the sale of infrastructure assets this year. If he increases his stake to above 70% from the current 52%, as the buyback and rights issue might allow, he can expect annual dividend proceeds exceeding 100 million euros. That can help him service the personal debt that he’s likely assuming to fund the rights issue. The move may also strengthen Niel's hand and his financial upside, should the perennial on-again, off-again efforts to consolidate the French market resume.The steps at Iliad don’t particularly disadvantage existing shareholders financially, even if they do seem to be very much in Niel’s interest. They’re under no obligation to sell, and have already benefited from a jump in the share price, which climbed 18% on Tuesday. Nor does the increased payout significantly weaken the firm’s finances: The dividend payout will top 154 million euros. Net debt of 3.7 times Ebitda will fall closer to 2.5 times Ebitda. And it’s far less outrageous than the self-interested efforts of fellow French billionaire Vincent Bollore and his family to extend control over Vivendi SA. The Bollores are simply carrying out a buyback of the media conglomerate’s shares, then canceling them, leaving the family with a bigger stake without increasing their financial risk.But for all of Niel’s assertions that the investment reflects his “confidence in the company’s industrial project,” he will likely need Iliad to continue the more generous dividend payouts to service his greater debt. That will gradually chip away at Iliad’s ability to engage in costly price wars to drive market share. Instead, it’s becoming more like its rivals, generating steadier, more predictable returns, rather than promising stratospheric stock growth.To contact the author of this story: Alex Webb at awebb25@bloomberg.netTo contact the editor responsible for this story: Melissa Pozsgay at mpozsgay@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

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