Why Is Vodafone Stock Trading Lower Wednesday?

Vodafone Group Plc VOD stock is trading lower Wednesday as the UK antitrust regulator, Competition and Markets Authority (CMA), began its Phase 1 investigation into Vodafone UK’s joint venture agreement with  CK Hutchison Holdings Ltd CKHUY CKHUF Three UK.

The deal combined the companies’ telecommunications operations under one network provider.

The CMA now has up to 40 working days to evaluate the deal. It aims to analyze the proposed deal’s potential impact on competition for consumers and businesses.

Post-merger Vodafone will own 51% of the combined business, and CKHGT will have the remaining 49%.

On a separate note, Vodafone has turned down a revised proposal from Iliad SA to merge their respective Italian operations, halting Iliad’s efforts to strengthen its position in the highly competitive European telecom sector. The latest offer aimed to establish a joint venture, providing Vodafone with €6.6 billion in cash and a €2 billion shareholder loan, Bloomberg reports. 

In contrast, Iliad would receive €400 million in cash and a similar €2 billion loan. This offer included an additional €100 million in cash compared to Iliad’s initial bid and removed call options that could have increased Iliad’s control over time.

Iliad’s billionaire owner, Xavier Niel, flagged Vodafone’s challenges in the Italian market, which he sees as ripe for consolidation. Following the rejection, Iliad announced it would continue independently in Italy, focusing on gaining market share.

This rejection follows Vodafone’s previous dismissal of an €11.25 billion offer for its Italian business from an Iliad-supported consortium in 2022, citing it was not in the best interest of shareholders. The report further added Vodafone has been exploring different options, including mergers or sales of its Italian unit, with various parties like Fastweb, a subsidiary of Swisscom AG SCMWY, showing interest in a potential deal with Vodafone’s Italian operations.

Last November, Vodafone reported a revenue decline of 4.3% YoY to €21.94 billion ($23.877 billion) in the first half of FY24. The stock lost 24% last year in stock value.

The company completed 2,700 role reductions in the first half out of the 11,000 planned over three years.

Price Action: VOD shares traded lower by 3.50% at $8.54 premarket the last check Wednesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo via Wikimedia Commons