Market Report: Vodafone builds on mobile internet hopes

Hopes of increasing mobile internet use helped Vodafone to weather a weak session on the benchmark FTSE 100 index last night.

The telecoms group saw its shares firm up by 0.25p to 148.4p after Exane BNP Paribas, drawing on the conclusions of a report on the prospects for mobile internet use, said that even though voice revenues at European operators will continue to decline beyond the recession, the top line should improve. The main driver will be mobile internet access on smartphones, with the report, which was jointly produced by Exane and Arthur D Little, suggesting that usage will accelerate further in 2010 and 2011. Beyond the top line, the broker said investor fears regarding capital expenditure had been overdone, and were "largely exaggerated for the vast majority of European telcos", while, elsewhere, it forecasts most dividends "appear absolutely sustainable for the coming years".

In Vodafone's case, the European operations should see revenues improve both in absolute and relative terms as the macro picture brightens and the division's market share stabilises, the broker said. Moreover, investors may receive a boost from two Vodafone-specific catalysts. "First, the long-awaited return of a dividend from Verizon Wireless, which could add more than 50 per cent to reported FCF [free cash flow] and lead to a higher dividend," Exane explained, moving the stock to "outperform" from "underperform". "In our view this could happen by mid-2011. In the meantime, the sale of the SFR stake to Vivendi seems a real possibility," the broker added, revising its Vodafone target price to 178p.

Overall, the FTSE 100 touched a session low of 5563.14 before paring losses in the final hours of play to close at 5602.3, down 4.42 points. The mid-cap FTSE 250 index was also under pressure, easing by 11.71 points to 9774.68, as traders marked the anniversary of the lows stuck by world markets in 2009 by banking profits from recent gains. Dismal trade figures for the UK, coupled with concern about the country's credit ratings, weighed on sentiment, as did softening commodity prices, with gold and copper retreating in afternoon trading.

Fresnillo, down 8p at 840p, was among the weakest of the miners, while Randgold Resources lost 75p to 5005p. Antofagasta was among those that managed to rise, adding 11p to 1005p after issuing full-year results.

Volumes, which have been waning in recent sessions, continued to thin, with Anthony Grech, market strategist at IG, pinning the weakness on the strength over the last few weeks. "Blue chips in London have rallied by more than 10 per cent in the past month, so it should not be too surprising if some investors choose to adopt a wait-and-see approach to the market at current levels," he explained.

Royal Bank of Scotland, down 0.49p at 38.89p, and Lloyds, down 0.47p at 53.18p, were held back after Credit Suisse struck a decidedly cautious note on the sector's prospects, saying that "the most relevant question for us is not how quickly revenue will rise, but how painful the transition to a more stable liquidity, funding and capital structure will be". "While the precise timing of new liquidity requirements is unclear, we believe banks must improve balance sheet structures over the next 3 [to] 4 years. This will be difficult through term issuance alone, and we believe that balance sheet footings will have to shrink markedly to compensate," the broker explained, adding that, in relative terms, Barclays, up 0.8p at 345.8p, was its favourite of the UK banks.

Elsewhere, the inter-dealer broker Tullett Prebon, up 1.4p at 310.2p, was the focus of some feverish bid speculation, with market watchers citing rumours anticipating a 400p per share approach. GFI, which has been linked with the company before, was soon named as a likely suitor, though some also noted the possibility of interest from a mainstream bank. The chatter was supplemented by some words of support from Nomura, which, while reiterating its "buy" stance, raised its target price for the stock to 380p from 360p.

Back on the downside, Imperial Tobacco was 54p weaker at 2091p after UBS turned negative. "We believe the stock is fully valued and that market consensus for 2011 onwards is too high," the broker said, switching its stance to "sell" from "neutral", albeit with a revised 1990p target price, compared to 1860p previously. "We believe that post-2010 the rate of underlying EPS [earnings per share] growth will slow significantly as the bulk of the cost savings from the Altadis integration are completed and the group remains unable to repurchase stock or make meaningful acquisitions as it seeks to de-gear."

Further afield, UBS was more positive on Davis Service, the laundry and workwear group which added 0.8p to close at 409.7p after the broker, weighing on last month's annual results, upped its target price for the stock to 480p. "We continue to like the solid performance and market position, as well as the combination of [an] appealing valuation and [a] high dividend yield," UBS said, repeating its "buy" recommendation.

News
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Sport
Arsenal supporters gather for a recent ‘fan party’ in New Jersey
football
News
i100
Sport
sportDidier Drogba returns to Chelsea on one-year deal
PROMOTED VIDEO
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
film
Life and Style
Balmain's autumn/winter 2014 campaign, shot by Mario Sorrenti and featuring Binx Walton, Cara Delevingne, Jourdan Dunn, Ysaunny Brito, Issa Lish and Kayla Scott
fashionHow Olivier Rousteing is revitalising the house of Balmain
News
i100
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
News
people
News
BBC broadcaster and presenter Evan Davis, who will be taking over from Jeremy Paxman on Newsnight
peopleForget Paxman - what will Evan Davis be like on Newsnight?
Life and Style
fashionCustomer complained about the visibly protruding ribs
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Life and Style
People may feel that they're procrastinating by watching TV in the evening
life
News
Tovey says of homeless charity the Pillion Trust : 'If it weren't for them and the park attendant I wouldn't be here today.'
people
Sport
Rhys Williams
commonwealth games
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

The benefits of being in Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Test Analyst - UAT - Credit Risk

£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

The BBC’s wolf in sheep’s clothing

What will Evan Davis be like on Newsnight?
Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

Finding the names for America’s shame

The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
Inside a church for Born Again Christians: Speaking to God in a Manchester multiplex

Inside a church for Born Again Christians

As Britain's Anglican church struggles to establish its modern identity, one branch of Christianity is booming
Rihanna, Kim Kardashian and me: How Olivier Rousteing is revitalising the house of Balmain

Olivier Rousteing is revitalising the house of Balmain

Parisian couturier Pierre Balmain made his name dressing the mid-century jet set. Today, Olivier Rousteing – heir to the house Pierre built – is celebrating their 21st-century equivalents. The result? Nothing short of Balmania
Cancer, cardiac arrest, HIV and homelessness - and he's only 39

Incredible survival story of David Tovey

Tovey went from cooking for the Queen to rifling through bins for his supper. His is a startling story of endurance against the odds – and of a social safety net failing at every turn
Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little