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Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:

Patience Needed on Vodafone by Arindam Nag

Summary: Barron's joins the ranks in deriding the 'activist shareholders' (Efficient Capital Structures), who last week sent a letter to Vodafone (NASDAQ:VOD) with suggestions for the telecom giant: 1) It suggests the UK mobile company issue a tracking stock that reflects its 45% stake in Verizon Wireless. Tracking stocks are normally issued only when a parent has full control of the division being tracked, but since Verizon Communications (NYSE:VZ) owns the other 55% of Verizon Wireless, a tracker would be unable to influence operations, and thus would not carry any takeover premium, keeping its share price in a narrow range. 2) It wants Vodafone to borrow more than £30B in order to buy back shares or boost dividends. Vodafone's single-A balance sheet does give it some leverage, but its investments in emerging markets like Turkey and India are capital intensive, and taking on excessive debt could cause a rating downgrade, raising its future cost of capital. Barron's says Vodafone might consider pressuring Verizon to pay a bigger dividend, but says it would be ill-advised to sell its stake due to activist pressure: "It should be able to get far more value for it in two or three years." Vodafone ADRs are up 50% in the past 12 months, suggesting 'agitating investors' should exercise patience and allow the company's strategies to pay off.

Related Links: Activist Group Wants Vodafone To Unlock As Much As $76 Billion In Shareholder ValueVodafone's Sarin Is Losing The PlotThe Mobile Phone Megatrend: Exploring the New FrontierParsing Vodafone's Results

Conference call transcript: Vodafone Group FY 2006

Vodafone 10 06 2007

Source: Vodafone Activists Should Show More Patience - Barron's