Voda responds to inefficiency claims

UK mobile operator Vodafone has responded to the proposed shake up of its capital structure by shareholder activist group Efficient Capital Structures (ECS).

Not surprisingly, the operator disagrees strongly with the proposals.

ECS suggested, in a letter sent Thursday, that the carrier suffers from an “inefficient capital structure”. Further to that, ECS requested that Voda put forward four separate resolutions that would help shake up the carrier’s capital structure to its shareholders at its forthcoming AGM on July 24.

The requisition principally relates to proposals regarding the structure of the Vodafone Group’s shareholding in Verizon Wireless and the group’s levels of debt. ECS promised that if passed, the resolutions would give Vodafone investors shares reflecting the carrier’s 45 per cent interest in Verizon Wireless and bonds worth £34bn, or 65p a share.

A statement from Vodafone reads: “The Board of Vodafone has reviewed the proposals from ECS and has unanimously concluded that continued execution of its clearly stated strategy will deliver greater value for shareholders. In particular, the Board of Vodafone believes the proposals from ECS would undermine both its ability to maximise the value of its shareholding in Verizon Wireless and Vodafone’s ability to invest in its businesses as well as exploit potential value creating opportunities.”

The proposals have met with a mixed reaction from City analysts. Some question the credibility and motives of ECS, specifically those of one of the firm’s key backers John Mayo, former deputy chief executive of Marconi. It was Mayo after all, who decided to load up GEC-Marconi with debt, flog its cashcow defence interests and hand out the cash pile to the shareholders.

However, some welcome the proposals. F&C Asset Management, a leading Vodafone shareholder, is quoted in today’s Financial Times saying ECS had raised “pertinent issues”.