Private Investor: Vodafone may be flying but I'm not buying

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One of the many great joys of listening to the BBC's Today programme is the little game John Humphrys plays with the business correspondents when they cover the company results. Last week was a classic. On Tuesday morning Vodafone, the world's largest mobile phone operator, announced full-year, pre-tax profits had risen 3 per cent to £10.3bn, a record for a UK company.

So Humphrys was invited to guess how the shares did. He got it right - they were down, and down no less than 7 per cent, dragging the whole FTSE 100 Index down with them (Vodafone is so big that it alone accounts for 8 per cent of the Footsie's value).

Then it was the turn of Marks & Spencer, with yet another set of disappointing numbers, the lowlight of which was a 19 per cent drop in profits, with sales down 5 per cent. Again, the Today programme presenter got it right. Marks shares were marked up on the news. Humphrys registered his usual dismay at the perverse ways of market capitalism. A funny old world, the stock market.

Maybe not quite that irrational, though. It's Vodafone's margins that are worrying the market, as it gets used to the telecoms giant becoming a mature stock more akin to a utility such as a water company - or an old-fashioned, fixed-line telecoms company - rather than the wave-of-the-future wondershare of the dot.com boom.

Well, I'm of the Humphrys persuasion. I think it's jolly unfair on Vodafone. The firm is still on track to hit its target of 10 million customers for its 3G network and I just can't help feeling that even if there aren't that many new high-spending mobile phone customers to be captured, the existing ones will carry on spending more and more on transmitting pics of their new baby or latest school reunion or whatever. The marginal cost of each is negligible but it all adds up for the companies.

As for recession, a mobile phone is just about the last thing anyone would get rid of if they lost their job - because it would help them get a new one.

And who knows what the investment the company is rightly making into eastern Europe will yield long term? The only real problem area is Japan, and at least the management seems to be clear that they've messed up there.

What's more, Arun Sarin, Vodafone's chief executive, is doing completely the right thing by shareholders by handing back cash through a double dividend and a share buyback.

So, does the drop in the share price and the cornucopia of shareholder value being showered on our heads add up to a case for buying more shares? I wonder. I am depressed and confounded by the City's scepticism about Vodafone.

Apart from a little pre-results rally, which was swiftly reversed, the shares have marked time for a year now, well below their boom-time peaks. They just trundle along at a few pence around the 140p mark, and there is seemingly nothing that the management can do to shift them. So, no more Vodafone for me, although I will be quite happy to retain my existing holding and watch the dividends reward me for my patience.

I have taken the plunge and sold my shares in Matrix Communications, far too late to make anything on them. A pure punt returned a tiny return, which I suppose serves me right.

I have placed the proceeds into William Hill, whose prospects in the new deregulated gambling-hungry Britain must be pretty good. I do think, however, that it might be a good idea - for the industry itself, as well as its customers - if the Government showed a bit more care for the victims of gambling addiction.

Maybe the industry could informally try to target those people who turn into rather too regular customers in betting shops, arcades and casinos. They should look to tobacco and fast food to see the damage to shareholders' funds that can arise from a sustained attack on the reputation of an industry.

The British probably do want to gamble a bit more than they have done in the past, and folk are entitled to waste their new-found prosperity anyway they wish. But it would be refreshing indeed if the backlash that will inevitably arise from gambling deregulation was to be pre-empted by a wise and forward-looking industry.

Those of us who are happy to put our money into the bookies would feel a good deal more secure about the investment if we could be sure that its public image - not great even now - was to be burnished a bit.

I just wish that I'd had a few quid on Liverpool...

sogrady@independent.co.uk

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