Market responded negatively on dividend payout-cut speculations. According to reports, Vodafone Group Plc (ADR) (NASDAQ:VOD) was amongst the biggest losers of the day. Market experts claim that problems are not supposed to end for Vodafone in the near future.
Insights On The Matter:
The auctions for spectrum are going on, and there are a few acquisitions on its way, which means that Vodafone is not likely to find itself in a comfortable free cash position. Recently, Nomura analyst published a report that doubted Vodafone’s cash rich position in the near future. If the current income & expense statement of Vodafone is taken into consideration, then one can find that spectrum buying process is costing around £1billionn to the company, close to 3% of its annual mobile revenues. It may result into dividend cut in the near future.
Nomura states in a statement that investors are not advised to buy Vodafone if they are looking forward to a sustainable growth. The current market situation doesn’t favor for Vodafone’s revenue model -, and the company needs some time to get on track. Flexibility is needed by Vodafone to finish its reincarnation process as an efficient mobile operator in the international market. The company faces a payout ratio of more than 100% to its cash flow, which is a sign of worry in the long run.
As soon as the report of Nomura hit the market, Vodafone Group Plc (ADR) (NASDAQ:VOD) faced a slight plunge in its share prices. It closed 2.8% lower than the previous open. It was Vodafone’s worst performance in the last two months. No company’s spokesperson could be contacted to comment on this issue. Even though the current market conditions don’t seem to support Vodafone, but experts hope that it will bounce back soon. As soon as the auction is finished, market can see a positive way once again.