Vodafone: Turnaround gets harder after another miserable quarter in Europe
Vodafone has said its total revenue shrank by over two per cent in its third quarter due to the sale of its Hungary business last year, contractions in Italy and Spain and sluggish growth in Germany, its biggest market.
In an update to markets, the telecoms giant reported a 2.3 per cent drop in revenue to €11.37bn (£9.7bn) over the third quarter, down from €11.63bn (39.9bn) in the same period last year.
Shares dipped two per cent when the opening bell rang on Monday morning.
Vodafone’s total revenue line was low compared to 2022 following the sale of its Hungary business a year ago, which has been stripped out of results.
Service revenue growth in Italy and Spain declined by 1.3 and 1.1 per cent, respectively, while Germany only grew by 0.3 per cent, following a strong second quarter.
Matt Britzman, equity analyst at Hargreaves Lansdown, said regulatory changes set to enter force in Germany this year “adds a layer of uncertainty” to operations there.
Changes to TV law change means Vodafone is having to migrate its customers to new contracts, which the company expects will take it two to three quarters to execute.
Consumer and business segments in the UK helped it to grow by 5.2 per cent, after 5.5 per cent last quarter, as lower revenue from fixed broadband dragged it back. The UK makes up 15 per cent of Vodafone’s total revenue.
Vodafone’s other European markets, its African business, plus cloud and internet of things (IoT) services all performed well. These digital services grew over 20 per cent, thanks to increased customers and price increases.
Group boss Margherita Della Valle is trying to shift the firm’s momentum by offloading under-performing units and emboldening those showing signs of life.
She sold off the Spanish division last October, is trying to merge the UK arm with other British telco Three and, last week, spurned an offer for the Italian outfit.
The telecoms boss said the “transactions in the UK and Spain are progressing well, and we are in active discussions in Italy.
“We’ve also begun strategic partnerships with Microsoft and Accenture to fast-track our transformation.”
Microsoft is investing in Vodafone’s IoT platform as it becomes a separate standalone business that the telecoms company hopes will accelerate its digital transformation.
Vodafone shares have tumbled 24.3 per cent over the past year.
According to Britzman, Vodafone’s results “had some pockets of optimism for investors to cling to”, with growth in line with the second quarter, but streamlining the business remains a top priority.
In a media call following the results, Della Valle said: “There is still so much to do; we will keep our foot to the gas”.