The premier British telecommunications provider Vodafone has this afternoon secured 4G radio-spectrum in the 800MHz band as well as renewal of 2G spectrum, in Romania, for 228.5m euros. The licences are valid until 2029.

In total, Vodafone has expanded its spectrum portfolio by 78%, according to the Romanian regulator.

That amount is 80% higher than Nomura´s estimate for spectrum cost in "other Europe" of £100m for fiscal year 2013. This has prompted analysts at Nomura to issue a research report this afternoon in which they tell clients"to consider the downside risk for Vodafone's medium-term dividend commitment."

In their own words: "as we highlighted in our recent downgrade from Buy to Neutral, ongoing spectrum cost is underappreciated by the market, in our view, and needs to be factored into assessments of underlying cash flow. In fiscal year 2013, Vodafone's expected dividend of 10.19p equates to a £5.0bn cash payout. Cash flow from controlled operations before spectrum is forecast at £5.0bn, which falls to £3.4bn post spectrum, implying a payout ratio of almost 150%.

"Admittedly, spectrum costs are lumpy and uncertain, but we expect up to £20bn of spectrum spend at Vodafone over the next 10 years and so some degree of amortised charge is clearly warranted.

"As a result, we think investors need to consider the downside risk for Vodafone's medium-term dividend commitment. We believe Vodafone's dividend needs to be rebased unless it is funded directly from Verizon Wireless cash flows - in which case the special dividend will be discontinued. We forecast a total dividend of 10p for fiscal year 2014, down from 14.2p for fiscal year 2013 and 13.5p for fiscal year 2012."

Shares of Vodafone ended today´s session down by 0.3%, at 178p.

AB

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