The flagship FTSE 100 index of leading shares has some companies in it that look like real bargains to me.

Here I want to discuss one that sells for pennies, has announced plans to slash its dividend, has sizeable debt and is shrinking its business.

That may not sound like everyone’s idea of a bargain!

So why do I think the share price in question looks much cheaper than I think it could be a few years down the line?

Fallen giant

The share in question is Vodafone (LSE: VOD). It is hard to remember now just how large and ambitious the company was a quarter of a century ago.

Not only has the FTSE 100 firm’s market capitalisation shrivelled since then (though at around £18bn, it is still substantial), but the company has been getting smaller too. Over the past few years, it has been selling off some of its operations in various European markets.

That has generated cash allowing Vodafone to reduce its debt. I see that as a positive move, even though the company is still carrying more debt than I like.

But a reduced business footprint could well mean revenues and profits shrink in coming years.

Why I like the share

As I see it, there are at least two very different ways to look at this situation.

One would be to see Vodafone as a formerly-high-flying business now in long-term managed decline. The dividend cut announced for next year is not the first.

The share price chart also looks woeful, with the FTSE 100 firm having seen its shares more than halve over the past five years.

But another approach would be to view Vodafone as being lumbered with a share price reflecting old investor fears, while its current business strategy is actually positioning it for a brighter future.

Selling units and seeing revenues fall is not necessarily a bad thing in my book. If it carries out its strategic shift successfully, Vodafone ought to be more focused, with a healthier balance sheet than before.

Customer demand remains high, the company has a massive customer base and it also can capture some interesting growth opportunities, such as rapidly expanding mobile money use in Africa.

Yes, the dividend is set to halve. But the current yield is 11.4%. Even at half that level, the yield would be well above today’s FTSE 100 average.

I’m holding

That explains why I have no plans to sell my Vodafone shares.

I think they are much cheaper than they ought to be and, hopefully, than where they might be a in a few years’ time.

With a big market, big brand and still a big dividend yield even after it is halved, I see the cup as half full.