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Institutional investor interest in Vodafone (LSE:VOD) shares remains solidly positive over both the long and the short term, but overall appetite is somewhat muted.

The data comes from Irithmics, the machine learning and artificial intelligence experts, who track investor behaviour in the market, and especially likely sentiment trends around blue chip stocks. This includes the behaviour of pension funds and fund managers.

Irithmics says investors don’t seem to be expecting much in the way of news out of Vodafone.

Vodafone shares are a favourite with bigger investors

One of the most popular and most liquid stocks on the London Stock Exchange, it is fair to say that Vodafone is owned by many fund managers and pension funds. The stock has managed to recover much of the ground that it lost in the second half of last year, and while not at 52 week highs, is not far off them.

A date for your diary

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A great deal of the focus on Vodafone in the past few months has swirled around its potential as a beneficiary of the auction of 5G networks in the UK and further afield. When UK telecommunications regulator Ofcom announced it had raised £1.4bn from the sale of additional capacity to support 5G mobile coverage, investors immediately concluded that major telecoms players like BT and Vodafone would have more money to play with on their balance sheets.

Vodafone itself paid £176.4m for 40MHz of bandwidth in the 3.6-3.8 GHz band. The auction was described by telecoms analyst Paolo Pescatore as a “perfect outcome for all parties, except for maybe the UK government that hoped to raise much needed funds to reduce its burgeoning debt.”

The auction has moved to what is known as the assignment stage – companies bid for the frequency positions they prefer for the airwaves they secured in the principal stage.

More challenges for Vodafone on the European front

Outside the UK, Vodafone faces more challenges in its European expansion plans.

“Fibre is on the agenda in Germany,” notes Dan Thomas, an analyst at Third Bridge. “The country is Vodafone’s biggest operation and while the Unitymedia deal gives it significant scale, a more fibre-focused Deutsche Telekom could limit the group’s ability to fully utilise its enlarged German cable footprint.”

Thomas says that a meaningful recovery for Vodafone in Spain and Italy is likely to remain difficult for as long as the competitive intensity in both of those markets persist. In Spain, Vodafone Ono continues to be squeezed between Telefonica’s premium offering and the value propositions of MasMovil, and increasingly Digi too.

“In the UK, the merger between Virgin Media and O2 could add pressure to Vodafone’s wireless business, as the larger fixed-mobile converged operator will be able to offer a more compelling consumer proposition,” Thomas adds.

Third Bridge says that all European carriers will have lost out on high margin roaming business this year. Business travellers account for the majority of roaming revenues. Those with established broadband offers have seen some benefit through customers upgrading speeds to accommodate working from home.

Vodafone shares staged an impressive comeback from around the 105 level in October to trade at more than 134 at time of writing. They still have a long way to go to return to the heady days of 2018 when they were trading at almost 250.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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A date for your diary

On the 21st of October, Stuart Fieldhouse will be joining Sarah Lowther and Mark Watson-Mitchell to discuss which small cap investments they like the look of and, perhaps, which ones they do not. It promises to be a lively and insightful discussion. If you are interested in investing in small cap stocks then this could be a profitable use of your time. We hope you can make it! Sign up now

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