Selling its Indian arm hit Vodafone’s bottom line in the first half of the year as the company looks to relieve its debt load following the proposed acquisition of Liberty Global assets.
Partly driven by the adoption of new IFRS 15 reporting standards, revenues dropped by 5.5 per cent to €21.8bn (£19bn).
The company discounted €1.6bn revenues from its Indian unit which was sold in August, while sales contracted in three key European markets, the UK, Italy and Spain, but grew in Germany and other European countries.
Vodafone posted losses of €2.9bn in the first six months of the year, down from a profit of €2.2bn year-on-year. Meanwhile, net debt grew 6.4 per cent to €32.1bn.
Why it’s interesting
Having already divested the company’s India operations, Vodafone is looking for ways to pay down its not insignificant debt.
In September, new chief executive Nick Read said he had considered selling some of its mobile masts in Europe.
With one eye on activist investor Elliott Management, Read said he would reduce debt by boosting earnings and selling assets.
He also plans to axe around 1,700 jobs in service centres in Egypt, India and Romania in coming years.
The company’s share price has steadily fallen since a year-high of 238p in January, reaching as low as 144p yesterday, it’s second-lowest closing in over five years.
Shares have risen 7.73 per cent to 156p on the results.
Richard Hunter, head of markets at Interactive Investor said: “Vodafone has been sending out a weak signal of late, but there are some indications that the telecoms giant is coming to grips with its issues.”
Its proposed €18bn takeover of Liberty Global’s assets in Germany, Hungary, the Czech Republic and Romania, which was called “a considerable threat to consumers” by one rival, is up for review by the European Commission.
The deal would make Vodafone a challenger to Deutsche Telekom, the largest player on the German market. European authorities are expected to reach a decision by 27 November.
“The Liberty Global acquisition has clear merits, whilst the fact that adjusted organics earnings grew by 2.9% is of comfort. Alongside this cash generative ability is a revised set of cost cutting targets which should offset some of the weaker revenues being seen in certain parts of the business,” Hunter said.
What Vodafone said
Chief executive Nick Read said: “Our performance in the majority of our markets has been good during the first half of the year, and we have taken decisive commercial and operational actions to respond to challenging competitive conditions in Italy and Spain.
“We are on track to reduce net operating expenses for the third year running, and we are confirming the mid-point of our Ebitda guidance range, with an increased outlook for free cash flow generation.
Looking ahead, my new strategic priorities focus on driving greater consistency of commercial execution, accelerating digital transformation, radically simplifying our operating model and generating better returns from our infrastructure assets.
Our goal is to deepen customer engagement through a broader offering of products and services, and to deliver the best digital customer experience, supported by consistent investment in our leading Gigabit networks. We expect that this will drive revenue growth, reduce churn and lower our European net operating expenses by at least €1.2bn by FY2021.
Our focus on organic growth along with the strategic and financial benefits of the proposed acquisition of Liberty Global's assets give confidence in the Group's ability to grow free cash flow, which underpins our dividend.”