Vodafone Initiates Third €500 Million Share Buyback as Part of €2 Billion Capital Return Plan

Highlights:

• €500 Million Buyback Commences: Vodafone has started its third €500 million share buyback, aiming to complete it by February 3, 2024.
• Proceeds from Spanish Unit Sale: The buyback forms part of a broader €2 billion capital return plan following the sale of Vodafone's Spanish operations for €5 billion.
• Citigroup to Manage New Buyback: Citigroup will oversee the latest buyback, while the previous tranche facilitated by Goldman Sachs concluded with 19.45 million shares repurchased.

Vodafone Group PLC (LSE:VOD) has initiated its third €500 million share buyback as part of a broader €2 billion capital return strategy to shareholders. This latest buyback round, facilitated by Citigroup, will commence on Thursday, November 16, and is expected to conclude by February 3, 2024.

The buyback program follows Vodafone's recent sale of its Spanish unit to Zegona Communications (LSE:ZEG) for €5 billion. The proceeds from this transaction are being directed toward shareholder returns, with Vodafone having committed €2 billion for share buybacks.

Capital Return Strategy in Action

Vodafone's capital return plan was unveiled as part of its broader strategy to optimize its business portfolio and enhance shareholder value. The company has already executed two previous buybacks under this scheme, each valued at €500 million.

The first buyback tranche concluded in August 2023, while the second was finalized just this week. According to a statement on Thursday, Vodafone completed the second round by repurchasing 19,451,090 shares through Goldman Sachs at an average price of 68.29p per share.

With the initiation of the third buyback, Vodafone remains on track to fulfill its €2 billion capital return commitment. Citigroup, the designated facilitator for this tranche, will manage the share repurchases over the next few months.

Strategic Use of Proceeds

The €5 billion sale of Vodafone's Spanish division to Zegona Communications has been a pivotal move in Vodafone’s recent restructuring efforts. The company has chosen to reinvest a substantial portion of the proceeds directly back into shareholder returns, signaling its focus on streamlining operations and enhancing shareholder value.

Vodafone's decision to pursue a share buyback rather than direct dividends reflects a strategy aimed at reducing its share count and boosting earnings per share, thereby increasing overall shareholder returns.

Market Reaction and Outlook

The market has responded positively to Vodafone's buyback initiatives, viewing the capital return as a signal of confidence in the company’s financial stability and strategic direction. Vodafone shares have shown resilience amid broader market volatility, with investors keenly watching the impact of the buyback on share performance.

As the third buyback phase kicks off, analysts anticipate that the continuation of share repurchases could support the stock price, especially if Vodafone maintains its disciplined approach to capital allocation.

Looking Ahead

Vodafone’s buyback program is set against the backdrop of significant restructuring within the company, including the sale of underperforming assets and a focus on its core business units. The successful completion of this €2 billion capital return plan will mark a significant milestone in Vodafone's efforts to streamline its operations and enhance shareholder value.

CEO Margherita Della Valle has emphasized the company’s commitment to reshaping its portfolio, prioritizing investments in growth areas, and returning excess capital to shareholders. The ongoing share buyback, coupled with other strategic moves, indicates Vodafone’s focus on long-term financial health and value creation.

The completion of the third tranche will be closely watched by analysts and investors as Vodafone aims to demonstrate its commitment to delivering on its capital return promises while navigating a challenging macroeconomic environment.