Vodafone rejects calls to restructure
Mobile phone giant Vodafone today rejected calls from shareholders for a restructuring of the company.
Efficient Capital Structures, owned by a group of Vodafone shareholders, has sent the company a list of resolutions it wants to put to a shareholder vote at the company's annual general meeting in July.
The group includes John Mayo, the former finance director of fallen telecoms equipment maker Marconi.
Although the resolutions will be heard at the meeting, Vodafone said that the ECS proposals "would not be in the interest of shareholders".
ECS's resolutions call for improvements to the firm's capital structure and the return of up to £38bn (€55.9bn) to shareholders.
If passed, Vodafone investors would receive shares that track the company's 45% interest in US mobile phone group Verizon Wireless, as well as bonds worth up to £34bn (€50bn), or 65p a share.
The shareholders say they are frustrated over Vodafone's "underperforming" share price and blame the company's capital structure for hindering progress.
ECS chairman Glenn Cooper said: "Vodafone's utility-like European business can be more efficiently financed while shareholders can benefit from the strong performance of Verizon Wireless, through direct pro rata ownership of Verizon Wireless shares."
But Vodafone said that the complex nature of tracking shares in Verizon would deliver less value for shareholders, while a £34bn (€50bn) bond would increase business risks and saddle it with an extra £2bn (€2.94) a year in interest payments.
The company said: "The proposals from ECS would undermine both its ability to maximise the potential value of its shareholding in Verizon Wireless and Vodafone's ability to invest in its businesses as well as exploit potential value creating opportunities."
Vodafone, which said it welcomed an "active and open dialogue with shareholders", last year saw 15% of them vote against or abstain in the re-election of chief executive Arun Sarin.
The company has previously received calls to sell its stake in Verizon, but the ECS proposals stop short of this measure.
A resolution can be put before investors if it has the backing of shareholders with an interest of 5% or more in the company, or has the backing or more than 100 individual shareholders.
ECS's members hold 210,000 shares and are using the 100 shareholders option to get the resolutions put to investors at the meeting on July 24.
Citigroup analysts said the news should help the Vodafone's share price but added that they believed the resolutions would not have any serious impact.
They said: "There's every argument for shareholder activism and we would support further restructuring at Vodafone. However, our initial reaction is that these suggested resolutions are weak."
Vodafone posted adjusted pre-tax profits of £8.75bn (€12.87) in the year to March 31, down 0.5% on a year earlier, although underlying earnings, which reflect the performance of the business at an operating level, edged ahead 1.6% to £11.96bn (€17.6bn).
