Top 10 investor backs Vodafone bosses ahead of AGM

A pedestrian passes a Vodafone store on Oxford Street in central London, November 10, 2009.

LONDON (Reuters) - A top 10 investor in Vodafone(VOD.L)backed management at the world's largest mobile operator on Monday, playing down a brewing investor rebellion over strategy ahead of what is expected to be a difficult AGM.

A source at the investment house said a divergence of opinion over Vodafone's management had been laid bare after one shareholder went public last week with its concerns over how the company had been run.

The source said that in the fund's opinion the management had done "perfectly well" in difficult conditions and said they expected any protest to be limited.

Vodafone reported stronger than expected first-quarter organic service sales on Friday, but the performance was overshadowed by a public complaint from the Ontario Teachers' Pension Plan, which owns 0.4 percent of the stock.

The OTPP may also have the support of other shareholders, including UBS, according to another source familiar with the situation. UBS declined to comment.

Meanwhile some analysts feel the company's strategy of owning minority stakes in markets such as France and the United States has resulted in a huge discount between its trading and sum of the parts valuation.

Recent shareholder revolts at retailer Tesco (TSCO.L) and Cable & Wireless Communications (CWC.L), over pay, both went further than expected and analysts have said the OTPP's decision to go public reflects a growing frustration with the firm.

Several other top Vodafone shareholders declined to comment however and the pension scheme proxy advisory firm Pirc, which has on occasion issued advice to vote against directors over strategy failings, said it did not recommend voting against either the chairman or his deputy.

It does recommend a vote against pay however, as it deems the executive bonus scheme to be insufficiently challenging in the targets set and excessive in its potential payouts.

Bernstein analyst Robin Bienenstock estimates that Vodafone trades at a 40 percent discount to the sum of its individual parts and believes the firm has written off some 50 billion pounds over the last 10 years.

"For at least the last five years, the company has had significant structural and strategic weaknesses, resulting in Vodafone trading at a substantial, persistent discount to its asset value," OTPP said last week.

The group said it would not back the re-election of Vodafone's Chairman John Bond and his deputy John Buchanan in protest at the group's "history of poor capital allocation and disastrous M&A".

Vodafone said on Friday it would announce a new strategy later this year, prompting speculation it would look to dispose of some assets and look to exploit further the development in data services for accessing the Internet via mobile phones.

Chief Executive Vittorio Colao, who reiterated his position that he does not wish to manage minority assets, has previously said his priority is resolving the situation in the U.S. where Vodafone owns 45 percent of Verizon Wireless but does not receive a dividend.

(Editing by Andrew Callus)