which stock is the most attractive?

Key points

  • Vodafone and BT share prices both look cheap
  • These two groups are similar in some ways but very different in others.
  • A company stands out as having better long-term growth prospects

the Vodafone (LSE: VOD) and BT (LSE: BT.A) stock prices have similar desirable qualities. They are both telecommunications companies with enticing revenues and currently seem cheap.

However, there are a few crucial differences between these two companies, which suggests to me that one might be the better buy for my wallet.

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Qualities of BT stock price

BT is the UK’s largest fixed line and broadband provider. This makes the company a highly defensive investment. Unfortunately, its market position is threatened. Smaller, more nimble competitors have been sneaking into its territory for years. Even Vodafone is trying to grab market share.

The organization responded by increasing capital spending and launching a customer service blitz. It’s starting to show results. Analysts expect the company to return to growth over the next two years.

Vodafone faces similar challenges in its European and international markets. It’s having to spend a lot of money to fight competitors. Still, its global footprint gives the group an edge over its smaller peers. Not only does the company have more financial resources to support its growth, but it can also offer consumers a more complete range of services.

I think this international presence is the main advantage of the company compared to BT.

Vodafone growth potential

The international telecommunications giant also seems to have more room for growth. Unlike BT, which has to spend money to consolidate its market position, Vodafone can focus on expanding into some of its key markets.

One of BT’s mistakes over the past decade is underinvesting in its network. This means it has to catch up with the rest of the market. Vodafone did not make the same mistake. Over the past decade, it has spent tens of billions of dollars building a network for the 21st century focused on data services.

That’s not to say the company can rest on its laurels. He will have to continue to invest to stay ahead of the competition. Nevertheless, this is another reason why I think Vodafone has more potential than BT’s share price.

Regulatory headwinds

Unlike Vodafone, BT also has to worry about regulatory headwinds. The telecommunications sector in the UK is highly regulated and, as the most powerful player in the country, BT attracts the most attention. It has been criticized for not investing enough in its broadband network and was forced to legally spin off its Openreach infrastructure business several years ago.

Vodafone has to meet regulators’ demands, but it has much more freedom to operate as a smaller company with a lower market share than BT.

As such, I think Vodafone has more potential than BT’s share price over the long term. I think it could be a great addition to my portfolio as a way to invest in the growth of the data economy in Europe and globally.

Rupert Hargreaves has no position in any of the stocks mentioned. The Motley Fool UK recommended Vodafone. The opinions expressed on the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we give in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a wide range of information makes us better investors.

Eleanor C. William