Its size challenges Vodafone

Has the law of large numbers finally caught up with Vodafone? The FTSE 100 has risen by 20% since April 1, and the FTSE global telecoms index by nearly as much. But Vodafone shares have managed only half that increase. Moreover, its share rating of 15 times forecast 2003 earnings suggests investors aren't terribly optimistic about it.

Wasn't Vodafone's global acquisition spree part of a plan to make it more profitable than rivals - and hence more attractive to investors? Perhaps - but investors have doubts about Europe's leading mobile phone operator on three scores. First, its growth prospects are seen as lacklustre.

Second, new entrants to its markets threaten its earnings. And third, it has an inefficient balance sheet. It isn't capturing the tax benefits of cheap debt, even though its tax rate is rising.

It isn't easy to see how...