JP Morgan has told clients that near-term risks for Vodafone, the FTSE 100 telecoms group, look skewed to the downside after a sharp rally driven by Xavier Niel.
Analyst Akhil Dattani kept an underweight rating on the shares.
On July 10, E&, the Abu Dhabi telecoms group and a Vodafone shareholder, said it intended to sell its stake to Niel, the French billionaire.
The announcement triggered a short squeeze of more than 35%, which pushed the shares to an August high of 131p.
A short squeeze happens when investors betting on a falling price are forced to buy the stock back as it rises, which pushes it higher still.
Dattani said he was not surprised, given Niel's track record, but that a run of negative developments had since changed the picture.
Germany
The first concern is a ruling on September 10 by the European Court of Justice, which risks invalidating the 2023 price rise at Vodafone Germany.
Dattani now models German service revenues deteriorating from growth of 1.2% in the first quarter to a fall of 0.5% in the second and 2.0% in the third.
Kenya
The second is a ruling on October 15 by the High Court of Kenya, which declared the government's sale of a 15% stake in Safaricom to Vodacom invalid, null and void.
Safaricom is Kenya's largest mobile operator, and Vodacom is Vodafone's South African-listed subsidiary.
Vodacom has been granted interim relief, but Dattani said it was unclear how the case would play out.
He said there was at least some risk of a negative outcome, with the deal unwound or the price renegotiated.
Fibre
The third is the sale on September 1 of the 50% stake in OXG, a German fibre joint venture, by Vodafone's partner Drahi to Societe Generale.
Dattani said new contract terms risked leaving Vodafone to contribute more than €1 billion in equity injections over the medium term.
