[ 2014-10-10 ]

Competition concerns send Vodafone lower

Investors have been wrong to assume mobile market
competition in Vodafone’s key markets is
reducing, warned Nomura Securities. The broker
also cautioned upgrading Vodafone’s substandard
network may put pressure on its medium-term
dividend.

Mobile markets in the UK, the Netherlands and
India all have new entrants, virtual operators in
Germany and Spain are cutting prices and
competition remains fierce in emerging markets
such as Turkey, Nomura said. The “substantial
earnings downside” means Vodafone shares do not
deserve a strategic premium over peers, it
argued.

Nomura also played down the chances of AT&T
bidding within the next 12 months. “We believe
AT&T will be in no hurry to target a
transformative transaction so soon after digesting
DirecTV,” it said.

Vodafone closed 3.4 per cent lower at 197.4p in a
volatile wider market that was being led by Wall
Street. The FTSE 100 erased a 1 per cent morning
rally to end down 0.8 per cent or 50.39 points at
6,431.85.

Retailers slipped after N Brown warned on profits
just three weeks after a reassuring half-year
trading update. While the mail-order specialist
blamed a 15 per cent downgrade to full-year
guidance solely on warm weather, it also reversed
a strategy to move from catalogue advertising.

N Brown sunk 13.3 per cent to 302p while Marks &
Spencer lost 2.1 per cent to 394.1p and
Kingfisher, which began trading ex a 3.2p
dividend, was down 5.1 per cent to 296.8p. Worries
about fragile UK demand and deteriorating housing
markets in France and China have combined to drag
Kingfisher a third lower since April.

Sports Direct lost 2.7 per cent to hit a one-year
low of 589.5p. The shares have dropped 21 per cent
since January, when Sports Direct first disclosed
it had taken a stake in high street peer
Debenhams, which has lost 31 per cent over the
same period.

Gold’s rally in response to dovish FOMC minutes
meant the precious metals miners outperformed.
African Barrick Gold rose 3.3 per cent to 207.2p
and Polymetal International added 2.1 per cent to
480.7p.

Randgold Resources jumped 6.1 per cent to £42.98
on upgrades from both HSBC and Numis Securities.
Numis was also keen on Fresnillo, up 6.4 per cent
to 770p, and Petra Diamonds, which added 3.4 per
cent to 190.3p.

Rio Tinto rose 2.1 per cent to £30.53 after its
head of iron ore provided a relatively upbeat
briefing to analysts in Perth. Presentations
concentrated on Rio’s efficiency drive to remain
the world’s lowest-cost iron ore producer over
the long term.

Hikma Pharmaceuticals rose 3.4 per cent to £18.60
after Barclays set a £20.50 target price, largely
predicated on large-scale M&A. A takeover of
fellow generic drugmaker CorePharma, which is
reportedly being auctioned for at least $1bn,
could boost Hikma’s 2016 earnings per share by
34 per cent, Barclays forecast.

Source - FT

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