Sector movers: Vodafone drags telecoms lower as Nomura highlights dividend risk
Vodafone was not connecting with shareholders on Friday as a falling share price pulled the mobile telecoms sector into the red on the back of gloomy comments from broker Nomura.
Nomura maintained a 'reduce' rating on the stock, saying that despite its weakness so far this year - Vodafone has underperformed the wider sector by 14% year-to-date - "several negative catalysts remain unresolved".
New entrants to the market will launch in the UK, India and the Netherlands; guidance for margin expansion could disappoint in May; while major spectrum auctions in India and Germany pose a downside risk.
The broker also said that Vodafone's dividend still remains "inflated" despite recently lowering its payout: "Vodafone needs flexibility for corporate transactions to complete its reincarnation as a convergent operator and an underlying payout ratio of more than 100% of cash flow and earnings will require a dividend reset at some juncture."
Vodafone was trading 2.8% lower at 219.95p by 16:04 in London.
Others in the sector such as Avanti Communications and The People's Operator were also trading in the red.
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