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Anlyzing Vodafone’s Value Proposition in the Global Telecom Market

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Vodafone’s operations

In the previous parts, we looked at some aspects of Vodafone’s (VOD) performance by geography during fiscal 3Q16. Vodafone’s operations are well diversified geographically. A predominant portion of Vodafone’s EBITDA (earnings before interest, tax, depreciation, and amortization) was generated from its European operations in fiscal 1H16. In the Europe region, Vodafone made an EBITDA of ~3.8 billion pounds in fiscal 1H16. Meanwhile, this metric for AMAP (or Africa, Middle East, and Asia Pacific) was ~2 billion pounds during the period.

Now let’s look at some value-centric metrics of Vodafone and select players in the global telecom space.

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Earnings multiples of Vodafone and select peers

As of February 8, 2016, Vodafone was trading at a next-year PE (price-to-earnings) of ~37.9x. On the same date, Telefonica (TEF), Orange (ORAN), and Deutsche Telekom (DTEGY) were trading at PE multiples of ~13x, ~13.5x, and ~16.8x, respectively. Meanwhile, both the US telecom giants AT&T (T) and Verizon (VZ) had a PE multiple of ~12.2x on the same date.

Dividend yields of Vodafone and select peers

Now let’s look at the dividend yields of Vodafone and select global telecom players. As of February 8, 2016, Vodafone’s forward annual dividend yield was ~5.7%. Meanwhile, Telefonica and Deutsche Telekom had forward annual dividend yields of ~8.7% and ~3.8%, respectively. Forward dividend yields of US telecom players AT&T and Verizon were ~5.3% and ~4.6%, respectively, as of the same date.

Instead of investing directly in Vodafone’s stock, you may consider taking diversified exposure to the telecom company by investing in the PowerShares International Dividend Achievers Portfolio (PID). The ETF had ~1.8% of its holdings in the telecom company at the end of December 2015.

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