FTSE 100 to see record high after strong show by Vodafone

The UK's top shares were up today, led by strong gains from Vodafone, as analysts bet the FTSE 100 could see a new record high over the near term.

Vodafone was up 2.8 per cent at 235.95 pence, with BofA Merrill Lynch and UBS pointing to the potential for the UK company to become a bid target after completion of the sale of its stake in US mobile phone company Verizon Wireless.

According to Vodafone, its shares would be consolidated on 24 February at the ratio of six new shares for 11 existing shares after the deal  closure today.

" 'New Vodafone'... starts near a sector multiple at 6.1 times, too low in our view," UBS said in a note. "If the market does not realise this value, we wonder if a third party could."

UBS increased its target price on Vodafone to 275 pence from 260 pence.

The company added a goodly 12 points to the FTSE 100 today, with the index up 29.80 points, or 0.4 per cent, at 6,842.79 points  which took its rally since an early February low to almost 7 per cent.

According to Valerie Gastaldy, head of technical analysis firm Day-By-Day, the market was reasserting its strength and he was inclined to follow it, Reuters reported.

She added the FTSE 100 should be heading to its all-time high at 6,950 soon.

Meanwhile, Vodafone is set to complete the biggest sale of the past decade today, which would see the wireless carrier cut to about half the size it was, as chief executive officer Vittorio Colao embarked on a new expansion strategy.

After it disposes its 45-per cent stake in Verizon Wireless, the biggest US mobile-phone company, Vodafone would pay out $82.5 billion to shareholders and consolidate its shares, cutting its market value to about £60 billion  starting next week.

The value of the company was £116 billion, on the basis of last month's 12-year high of 240 pence. The shares were up 2.7 per cent to 235.9 pence in the morning London trading.

Colao had focused on getting Vodafone out of joint ventures and partnerships it did not control, during his tenure. Now that Colao had pulled off his biggest sale, he would need to find place to grow as the company grappled with shrinking service revenue in its main European markets, according to commentators.

London-based analyst at Macquarie Bank Ltd Guy Peddy told Bloomberg in an interview that the next few months were going to be tough.