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.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Guru Careers: Tax Manager / Accountant

£35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...

Ashdown Group: Contracts Executive - City of London

£35000 - £37000 per annum + benefits: Ashdown Group: Contracts Executive - Cit...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...

Recruitment Genius: Call Centre Debt Collector - Multiple Roles

£21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

Day In a Page

Giants Club: After wholesale butchery of Idi Amin's regime, Uganda’s giants flourish once again

Uganda's giants are flourishing once again

After the wholesale butchery of Idi Amin's regime, elephant populations are finally recovering
The London: After 350 years, the riddle of Britain's exploding fleet is finally solved

After 350 years, the riddle of Britain's exploding fleet is finally solved

Archaeologists will recover a crucial item from the wreck of the London which could help shed more light on what happened in the vessel's final seconds
Airbus has patented a jet that could fly from London to New York in one hour

Airbus has patented a jet that could fly from London to New York in one hour

The invention involves turbojets and ramjets - a type of jet engine - and a rocket motor
10 best sun creams for kids

10 best sun creams for kids

Protect delicate and sensitive skin with products specially formulated for little ones
Tate Sensorium: New exhibition at Tate Britain invites art lovers to taste, smell and hear art

Tate Sensorium

New exhibition at Tate Britain invites art lovers to taste, smell and hear art
Ashes 2015: Nice guy Steven Finn is making up for lost time – and quickly

Nice guy Finn is making up for lost time – and quickly

He was man-of-the-match in the third Test following his recall to the England side
Ashes 2015: Remember Ashton Agar? The No 11 that nearly toppled England

Remember Ashton Agar?

The No 11 that nearly toppled England
Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks