Valuation of Vodafone Group

Thomas Klauer

Student thesis: Master thesis


This thesis answers the main research question: “What are the enterprise value and the fundamental share value of Vodafone Group as of May 20th, 2014?“ By using Monte Carlo simulations to estimate these values, the single enterprise value with the highest likelihood is found to be GBP 87.5bn, while the mean of the total probability distribution is calculated as GBP 94.1bn. Accordingly, the most likely fundamental share value is estimated to be GBP 2.23 with a mean value of GBP 2.48. In order to answer the main research question, the present thesis follows a structure guided by the following research sub-questions:  Which strategic factors, both on macro and micro level, are relevant to Vodafone, and how do they affect the valuation of the company?  What are Vodafone‟s sustainable competitive advantages?  How has Vodafone been performing financially in the recent years?  How is Vodafone expected to perform in the future? By applying the PEST analysis and Porter‟s Five Forces analysis, the firm‟s business environment is analyzed in detail, finding that the rapid increase in demand for data services and the development of new technologies are amongst the biggest opportunities for Vodafone, while regulatory pressures, the strong competition, and the market saturation comprise its main threats. A strategic analysis of Vodafone‟s resources and capabilities is conducted, using the VRIO framework. The group‟s global footprint, its superior network (infrastructure), and its strong brand are identified as sustainable competitive advantages. Following the DuPont-Model, Vodafone‟s past financial statements are reformulated to distinguish operating from financing activities, are adjusted, and are analyzed as well as compared with peers. This allows to project the company‟s performance into the future, with an explicit forecasting period of five years followed by a terminal period. Based on these forecasts, the adjusted present value model is used in combination with Monte Carlo simulations in order to estimate firm and share value. A sensitivity analysis is performed, so as to critically assess the valuation. Lastly, the results are tested against other network operators using comparative multiples, finding that the values found reflect a representative assessment of Vodafone‟s value and its share value as of May 20th, 2014.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2014
Number of pages102