Yes this company could turn around. However there is a real risk that it won't. Vodafone UK and Hutchison are supporting/subsidising the Australian operation. At some point they will need to decide whether to keep pumping money into a black hole or sell it to someone else. Looking at the latest figures a turn around to profitability is still some time away.
Capital markets are not what they were and both Vodafone and Hutch are under pressure worldwide to roll out 4G
Do you throw another $1B into Australia and 4G.. and possibly still lose money, or do you spend that $1B in another country that is profitable.
Vodafone needs to upgrade its backhaul. So many Vodafone towers have radio backhaul instead of optic fibre. Huge capital costs required to get Vodafone towers equipped with fibre.
Tower sharing with Optus will help. No doubt Optus will be charging for the Backhaul and making a tidy profit.
Businesses customers in particular continue to port away from Vodafone as contracts expire, or move when a new iphone, or Samsung galaxy is released.
My personal opinion is that what is being done is a last ditch attempt to turn the company around.
Both companies have made a commitment for 12 months to keep it a float.
I will not be surprised if this is sold to a cashed up overseas operator in 18 months from now.
Vodafone have done it before.
HTA Price at posting:
4.4¢ Sentiment: None Disclosure: Not Held
