Broker snap: Smartphones bolster Vodafone growth

17th Mar 2011 10:31

Nomura keeps its positive stance on mobile telecoms giant Vodafone following an 'open office' meeting with its managers, as good progress is being experienced across the board, with a particular significance on its position in the smartphone industry.The group's operational managers from Germany, Italy, Netherlands and the UK all indicated that their operations were gaining market share, according to the Japanese broker.The firm is focused on managing customer lifetime value across its units, and the broker says that the managers were confident that smartphones were increasing value on this measure, "aided by contract length extension and reducing churn", says analyst James Britton.The broker remains a 'buyer' of Vodafone with a target price of 220p.Evolution Securities was obviously invited to the same event. "We attended presentations from the German, Italian, UK and Dutch management teams. Having endured some lean times, UK and Dutch operations are in the midst of an impressive turnaround, while Italian and German management teams wrestle with the challenges of being an incumbent. The UK, especially, is taking advantage of the merger travails of "Everything Everywhere" and winning back market share. The Italian management team were impressive, but face a far tougher market backdrop, while German management's appraisal of its market opportunity was the least convincing, despite healthy market trends," the broker said.The broker has upgraded the stock to "neutral", pointing to the "well covered 5.4% diviend yield" as a good reason for sticking with the stock."This was not a "numbers day" and we are making no changes to our forecasts at this stage. However, the share price is now below our target and while we retain fundamental concerns over Vodafone's profitability in the long term, one could say the same of most companies in most industries in the short term. Relative to others, Vodafone should be relatively unaffected by supply chain problems (fewer handsets may even reduce churn), has few inflation worries and is a beneficiary of recent € strength," Evo noted.