Geoffrey Smith 

Investing.com — Vodafone LON: Group stock dropped by Mid-morning Tuesday in London after the company forecasted a flat year and was weighed down by inflation.  

U.K.’s top mobile network provider stated that adjusted earnings before interest and taxes will range from 15.0 billion to 15 billion euros. That is basically unchanged from Tuesday’s 15.3 billion for the March year. From 5.4 billion, free cash flow will drop to 5.3 billion euros ($5.7billion), but that is still sufficient to pay a dividend yielding over 6%. 

In a statement, Nick Read, chief executive, stated, “The current macroeconomic conditions present specific challenges, including inflation. It is likely that our financial performance will impact in the coming year.” 

Read stated that the group’s goals remain unchanged since six months ago. This implicitly refers to Cevian, a Swedish activist investor who has claimed it wants Vodafone simplify its business model, and to sell down underperforming businesses. 

The board’s position has been strengthened in the last few days as the company announced that e&, the state-controlled telecoms operator of Abu Dhabi, had built a 9.8% stake in the group for around $4.4 billion, citing the group’s ‘compelling valuation’. After years of hard restructuring, the stock is now trading at half its peak in 2015.

According to the UAE-based company, it supported the current board strategy and wanted to remain a shareholder for the long term.

Cevian was offered an olive branch by Read, who stated that the company is still looking for deals in regards to Vantage Towers, (ETR):, the masts unit it created 15 months ago. 

Last week, the FT reported that they are also talking to 3, the mobile operator controlled by Li Ka Shing’s CK Hutchison. (HK:), about a potential combination of their U.K. business. With just 21.2% EBITDA margin, Vodafone’s U.K. business is among the most profitable. The comparable margin in Germany is 43%, with 425m euros of merger synergies achieved by UnityMedia, two years earlier than planned.