Oh, no…the Vocus Group Ltd (ASX: VOC) share price is down 65% in one year.
Vocus share price versus ASX 200
As can be seen in the chart above the Vocus Group share price has hugely underperformed the market, or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), over the past year.
What on earth is going on?
Vocus is the owner of Dodo, iPrimus and Commander telecommunications brands. In New Zealand, it also owns names like Slingshot, Switch, Flip, CallPlus and Orcon. Not only that, behind the scenes, Vocus owns names like Amcom, NextGen and 2Talk, and a wide infrastructure network.
To get to where it is today, Vocus has had to acquire many businesses (as you can imagine, given all of its brands).
But when a company acquires many businesses, the risk associated with the acquirer dramatically increases. For example, changes in workplace culture can meaningfully affect employee morale. As a result, businesses begin to underperform expectations. Moreover, the proverbial 'cockroaches' typically take one to two years to crawl out of financial statements — causing headaches for analysts and uncertainty for shareholders.
Not only are those risks now stepping into the spotlight; Vocus' rival TPG Telecom Ltd (ASX: TPM) has also been on a takeover spree. It owns iiNet and has been rapidly expanding its own fibre network and pushing into the mobiles market.
Another concern on investors' minds is the rollout of the NBN, which is making companies like Vocus a retailer of telco products. When a market is competitive, retailers often see their profit margins narrow to keep market share — that hurts profits.
However, Vocus may actually be a winner from the NBN.
Foolish Takeaway
If Vocus can hit its financial targets, its shares will look cheap in a year's time, in my opinion. Unfortunately, that could be considered a big 'if' given the recent rumours in the telco industry.
Nonetheless, a high-risk investor could do worse than run the ruler over Vocus shares today — I know I am.
