Vodafone CEO Focuses on Deals in U.K., Italy, Spain and Portugal

(Bloomberg) -- Vodafone Group Plc is hunting for mergers in the U.K., Spain, Italy and Portugal, according to Chief Executive Officer Nick Read.

“I just stand back and look at markets where I see a very strong case for consolidation without the need for punitive remedies,” Read said on a call with reporters following a third-quarter trading update on Wednesday.

“It's those four markets that I think are the largest opportunity. We're engaged with multiple parties on multiple markets,” he added.

Read declined to comment on reports that activist investor Cevian Capital AB has taken a stake in Newbury, England-based Vodafone and is agitating for change.

Last month, Bloomberg reported that Vodafone approached wireless rival Three UK, owned by CK Hutchison Holdings Ltd., while Reuters and El Confidencial reported talks in Italy and Spain respectively.

Vodafone is also looking for deals through its mast spinoff company Vantage Towers AG. It's held preliminary talks with Deutsche Telekom AG, according to people familiar with the matter.

“The next stage we believe should be an industrial merger bringing our towers with another large player, a like-minded player,” Read said. “We're actively engaged. That is our ideal option.”

Read said there are too many mobile companies in Europe, leading to relentless competition and unsustainably low returns on capital.

A combination could create a “European champion” in towers, and receive money in a sell-down of Vodafone's 82% stake in Vantage, while retaining “co-control,” Read said. Backup options include other partners, such as specialized tower companies, he added.

Vodafone shares rose as much as 3.3% in London on Wednesday after it beat analyst estimates for third-quarter sales. Service revenue shrank less than forecast in the intensely competitive Spanish unit, which has been restructured, as well as the similarly challenged Italian market.

Service revenue in Vodafone's biggest market, Germany, grew slightly faster than expected.

Jefferies analyst Jerry Dellis said in a note to clients Wednesday that the German beat came from mobile tariffs despite coronavirus restrictions hampering retail store sales, as well as a new telecommunications law that prohibits automatic contract extensions.