SLI calls on Vodafone to sell off stake in Verizon

STANDARD Life Investments (SLI) today fired a salvo of criticism at Vodafone over its growth strategy, as the world's biggest mobile phone company by revenues announced a 7.1 million increase in customer numbers.

In doing so, the investment arm of Edinburgh-based insurer Standard Life, which is Vodafone's ninth-biggest shareholder, became the first major investor to publicly criticise the cellphone colossus.

David Cummings, head of UK equities at SLI, wants Vodafone to sell off its 45 per cent stake in Verizon Wireless, the US-based network operator which is thought to be worth around 25 billion and which Vodafone today insisted "continues to perform well".

That, he said, would leave the firm free to concentrate on its Asian and European business where pricing pressure has been mounting.

He said: "We are very supportive of a sale of Verizon. It would give a massive earnings uplift and there is a willing buyer for Verizon."

Mr Cummings said that the City's low rating of Vodafone stock - which has fallen five per cent so far this year - showed confidence in the company had been lost, with analysts rating the group more like a utility operation.

A sale and the return of cash to investors give Vodafone shares a much-needed lift, he argued.

Others in the City have lost confidence in the management of Vodafone under chief executive Arun Sarin but seem willing to wait until Sir John Bond takes up the chairmanship of the company in July before publicly expressing any dissatisfaction.

SLI's airing of dissent came as Vodafone released figures showing it added 7.1m new customers on an organic basis in the key Christmas quarter, taking its global total to 179.3m.

That customer boost in the third quarter to December 31 was ahead of City forecasts, which were in the range 5.4m-6.3m. Vodafone also said that it was sticking with its guidance for the current year and its outlook for the next year.

"The group expects organic growth for this financial year in proportionate mobile revenue in the middle of the six per cent to nine per cent range," Vodafone said, adding that the preliminary outlook for next year "remains unchanged". Darren Ward, analyst at Williams de Broe, said the reiteration of market guidance was "reassuring".

In the UK Vodafone added 561,000 subscribers, a rise of seven per cent to 16.3m, but average revenue per user (ARPU) in its home market fell by 4.3 per cent.

Yesterday, rival O2 said it had seen its global customer base rise by 18 per cent to 24.4m, with 895,000 additional customers in the UK, giving it a home-based total of 15.98m.

Mr Sarin described the UK market as "highly competitive" but said growth worldwide remained healthy with demand for 3G phones continuing to climb.

Over the quarter, Vodafone added 3.1m 3G devices to its network, taking the total to eight million. However, it added that in general, competition in Europe was rising, particularly in major markets such as the UK, Germany and Italy.

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