Vodafone shares boost as UAE telecoms firm buys 9.8% stake     

Vodafone shares are up as e& buys nearly 10% stake in the company.

Shares in Vodafone edged higher on Monday as a surprise $4.4bn investment from the UAE-based telecoms company, e&, provided a much-needed but possibly short-term boost to Vodafone's CEO Nick Read.

E&, which was previously known as Etisalat, said it had become the largest shareholder in Vodafone with a 9.8% stake. It said it was attracted to its management and its efforts to unlock value and a diversified currency base. 

It ruled out exerting control or launching a full takeover.

Analysts were divided, however, over the group's long-term plan, after activist investor Cevian Capital and other long-standing shareholders called on Vodafone to simplify its portfolio, repair markets through consolidation, and boost returns.

While analysts at JP Morgan said the new shareholder could become more activist over time — possibly in conjunction with Cevian — Credit Suisse and Jefferies said the investment could give CEO Mr Nick Read more breathing room to invest in assets and withstand pressure to sell off operations immediately.

"Indeed it could even allow Vodafone to make investment decisions that come at the expense of short-term free cashflow generation now that it has an industrial backer with a long term time horizon," Credit Suisse said.

Jefferies said the presence the shareholder could counteract the activist demands. 

-Reuters