Vodacom\u2019s share price has endured a rollercoaster ride over the last few months \u2013 first showing strong growth to an all time high of R110.41 in early April, and then plummeting to around R90 per share. The Vodacom price recovered slightly after a positive trading statement on Thursday 19 July, and is currently trading at around R94 per share.<\/p>\n
This decline in share price over the last few weeks raises the question whether Vodacom is a good investment at current levels. Analysts are divided on the issue.<\/p>\n
Stay away: Hlelo Giyose<\/strong><\/p>\n Hlelo Giyose, chief investment officer and principal at First Avenue Investment Management, said that he will not touch any telecommunications share.<\/p>\n \u201cThe level of competition is intensifying in South Africa, and the results [from Vodacom] show that,\u201d said Giyose. \u201cCell C has upped the ante phenomenally.\u201d<\/p>\n Giyose argued that the saving grace for Vodacom is what they are doing outside of South Africa, and the strong growth in mobile data. However, this is not enough to overcome lower margins going forward.<\/p>\n \u201cThe market does not believe these mobile companies will be as successful in the future as they have been in the past. The landscape has changed,\u201d said Giyose.<\/p>\n Giyose added that while MTN\u2019s greater diversification into other markets limits the impact of a local price war, he would not invest in any telecoms companies.<\/p>\n \u201cThese companies have done a really great job of psychologically manipulating our consumers here at offering mahala (a free package) when there is actually a cost here,\u201d argued Giyose.<\/p>\n \u201cThey have done a great job of psychologically convincing the regulator that the prices here are cheaper than anywhere else in the world, yet South Africa has the third highest cost for mobile calls globally.\u201d<\/p>\n Giyose said that if an investor buys shares in Vodacom and MTN, they are betting that society stays dumb for a long time and that people do not see that these mobile companies are lying. \u201cThat is not a bet I want to make,\u201d said Giyose.<\/p>\n Vodacom is a buy: David Shapiro and Wayne McCurrie<\/strong><\/p>\n Wayne McCurrie of Momentum Asset Management disagrees with Giyose, arguing that Vodacom is a great stock to invest in at its current levels.<\/p>\n McCurrie said that that he can see no logical reason for Vodacom\u2019s share price decline over the last few months. \u201cIt was not expensive to start off with, it is a very stable business and Cell C and 8ta have proven that they are not really competition at all,\u201d said McCurrie.<\/p>\n \u201cVodacom has huge cash piles and the company has big dividend payouts. This is one of those shares where you do not have to worry what the price does \u2013 the dividends are high enough to compensate you for owning the share,\u201d said McCurrie.<\/p>\n David Shapiro, deputy chairman at Sasfin Securities, agrees with McCurrie. \u201cI like to buy dividend payers. If they can even maintain their profits at current levels you are on a 7 dividend yield \u2013 it is much better than putting money in the bank,\u201d said Shapiro.<\/p>\n \u201cUnless they mess it up completely and profits starts falling I think it [Vodacom\u2019s current share price] has got to be a very attractive entry point,\u201d said Shapiro.<\/p>\n However, Shapiro did sound a warning: \u201cI am not sure if there is any particular reason why it is being sold down like that \u2013 if there is anything the market knows, or that people outside know, that we do not know. That is my only caution.\u201d<\/p>\n Related articles<\/strong><\/p>\n Vodacom shares boosted by Q1 update<\/strong><\/a><\/p>\n Vodacom hits 50 million customers<\/a><\/strong><\/p>\n Vodacom shares off amid Cell C battle<\/a><\/strong><\/p>\n