Liberty Global buys five per cent stake in Vodafone claiming shares are undervalued

Telecoms giant Liberty Global has bought an almost five per cent stake in Vodafone after claiming shares in the troubled firm are undervalued.

Liberty’s purchase of a 4.92 per cent stake in Vodafone comes as a vote of confidence in the British company, as it struggles to satisfy investors.  

The phone operator’s share price has suffered over the past five years as the FTSE-100 company has failed to deliver in the face of fierce competition in its main European markets.

Shares in Vodafone are now trading at their lowest levels since 1997, having lost almost a third of their value over the previous year alone.

Vodafone this month said its European revenues had continued to slide as price pressures hit its EU businesses, leading to speculation the firm might cut its dividend.

But Liberty still believes the firm has potential.

Liberty chief Mark Fries said: “We believe, like many others, that Vodafone’s current share price does not reflect the underlying long-term value of their operating businesses.”

Fries added that Liberty believes investors have failed to factor Vodafone’s “announced consolidation and infrastructure opportunities” into the company’s share price.

Liberty said it is not considering any plans to fully take over Vodafone as it said its investment in the UK firm comes as part of wider efforts to build its portfolio of telecoms and media businesses.

The deal will see Liberty purchase 1.335bn shares in Vodafone using external loans and £225m of equity funding.

A potential merger with rival phone operator Three UK offers the prospect of boosting Vodafone’s long-term prospects. Vodafone in October confirmed it had entered talks with Three UK’s parent company, CK Hutchinson, over a possible merger of the two businesses.