Broker snap: Vodafone downgraded to 'neutral'

25th May 2011 09:49

While Nomura leaves its target price for Vodafone at 210p, the broker downgrades the telecoms giant from 'buy' to 'neutral', saying that "customer lifetime value [is] heading in the wrong direction.""Despite the push on smartphones, European mobile momentum is heading south. Both O2 and KPN management have now admitted that the move to smartphones has not been positive for customer lifetime value. Despite Vodafone's protestations to the contrary, Vodafone is not immune to the sector's momentum," the broker said.Nomura suggests that European mobile operators need to rebalance more revenues into the monthly fee and avoid 'cannibalisation' of the various 'overage' components - voice, text and roaming.Furthermore, the broker estimates that "tougher regulation alone (mobile termination rate cuts in the UK and Italy, data roaming caps across Europe) should reduce European revenue growth by at least 100 basis points in Vodafone's first half."---BC