Vodafone (LSE: VOD) (NASDAQ: VOD.US) shareholders have been on a pretty good ride in the last year. In just over a week, investors will receive a £51bn windfall in what will be the biggest return of value to shareholders in corporate history. If you’re an investor wondering what to do with your Vodafone shares, or a newcomer unsure if the stock still has anything to give, here I’ll attempt to answer those questions.
These are three reasons Vodafone is still worth owning:
1) It’s a massively cash rich company
Not all of the Verizon windfall will end up in the back pocket of shareholders; Vodafone now has some £25bn to invest in future growth.
£7bn has been earmarked for Project Spring, an investment programme to improve network quality for customers in Europe and in emerging markets. These days mobile users are consuming more data than ever, with social networking the main culprit, along with music-streaming services such as Spotify and online shopping also contributing.
Vodafone hopes to satisfy these customers — as well as gain new ones — by rolling out 4G coverage to 90% of the population of its main markets by 2017. This should give Vodafone a serious one-up on its European competition.
2) A smaller Vodafone is a bid target
After long-running speculation, AT&T last month confirmed it would not be making an offer for Vodafone.
That doesn’t mean it won’t eventually happen, mind, as AT&T’s statement only rules out a bid for the next six months. The American giant could still see Vodafone as part of its long term plans: amid an increasingly competitive home market, AT&T has been looking toward Europe for growth.
Previously, analysts had predicted a bid from AT&T would be worth 280p a share. But there’s also the prospect that other companies with ambitions to expand may drive that price even higher. With companies across Asia — such as Japan’s SoftBank — scoping out Vodafone, you never know, a bidding war could be a real possibility.
3) Economic recovery in key markets
The bulk of Vodafone’s operations are in Europe and the major economies should soon rebound from their recent plight.
Smartphone penetration rates are a surprisingly low 39% throughout its top markets of the UK, Germany and the Netherlands. As consumer spending continues to get back on track there’s scope for that figure to rise, and with Vodafone’s 4G offering sure to entice new customers ahead of its rivals, the company looks well placed to benefit from an upswing in economic fortunes.
