VodafoneThree raises cost-cutting target to £1bn after merger
Vodafone has hiked its UK cost-saving target to £1bn a year as the telecoms giant looks to boost profits following its merger with Three.
The FTSE 100 company said on Thursday it now expects VodafoneThree to deliver £1bn in annual savings by 2032, up from its previous target of £700m by 2030.
The upgraded target comes just over two months after Vodafone completed a £4.3bn buyout of CK Hutchison’s remaining 49 per cent stake in the business, giving it full control of Britain’s largest mobile operator.
Vodafone also set new financial targets for the merged company, including mid-to-high single-digit annual growth in adjusted earnings between 2025 and 2032 and plans to more than triple operating free cash flow over the same period.
Chief executive Margherita Della Valle said the group had become more confident in the merger’s financial potential following a strong start.
“We created VodafoneThree because we saw the opportunity to transform the UK market. To create the scale to invest. To deliver a step change in network quality and customer experience across every region of the UK”, she said.
“After a strong start, we now have even greater confidence in the opportunity ahead”.
The company said the additional savings would come from combining and streamlining its mobile networks, alongside efficiencies made possible by Vodafone’s full ownership of the business.
Vodafone bets on £11bn network overhaul
The new targets form part of VodafoneThree’s wider £11bn investment programme to improve mobile coverage and build a next-generation 5G network across the UK over the next decade.
Vodafone said the investment would help it strengthen its position in the consumer market, where it claims to have the UK’s largest mobile customer base.
The company reported record-low customer churn across its brands since the merger, alongside rising average revenue per customer.
It is also targeting growth in broadband, business connectivity and digital services, including cyber security and AI.
VodafoneThree said it expects its return on capital to exceed its cost of capital by 2032, with further improvements by 2034.
The upgraded targets come as competition in Britain’s telecoms market intensifies following BT’s acquisition of Talktalk’s consumer and wholesale businesses earlier this week.
That deal, which rescued around 2.5 million retail and wholesale customer connections from the collapse of Talktalk, has prompted a government-ordered competition review over concerns about BT’s growing market position.
Vodafone’s merger with Three, completed last year, was itself approved subject to commitments including the £11bn network investment programme.
Della Valle said VodafoneThree would become an increasingly important contributor to the group’s wider growth ambitions, as it targets double-digit organic growth in adjusted free cash flow over the medium term.