UK saves the day for Vodafone as German market falters once again
Vodafone continued its revenue dip in Germany this quarter as regulation dents the firm’s largest market.
Revenue for German services dropped a further 0.5 per cent, largely reflecting the impact of the Telecommunications Act, which has fuelled a customer decline, notably in cable (34,000), DSL (30,000) and TV (79,000).
CCS Insight analyst Kester Mann told Morning Wire that this drop was the “main blot” in the results, with the German making up 30 per cent of service revenue for Vodafone.
Vodafone said that remedial efforts to improve IT systems and customer journeys were now slowly reducing these losses, and would be felt by the end of the summer.
By comparison, the FTSE 100 firm posted strong UK results, largely driven by price hikes and roaming charges from holidaymakers.
The industry has seen a 8-9 per cent increase in bills in the past few months, and Vodafone execs confirmed there would be no further increases.
Mann also highlighted the strong growth in pay-as-you-go was one of the “main surprises,” from the results, with nearly 100,000 new customers added in the UK.
He added that there had been an “minimal adverse impact from April’s inflation-linked price rises as both the total number of customers and their average spending increased”.
Vodafone chief Nick Read said that whilst the FTSE 100 company was “not immune” to current macroeconomic challenges, he said the near-term focus on operational and portfolio priorities remains unchanged.
“We’ve made good progress towards stabilising our commercial performance in Germany, and we continue to actively pursue opportunities with Vantage Towers and to strengthen our market positions in Europe,” he said.
Commenting on the stock, AJ Bell investment director Russ Mould said: “Vodafone’s share price continues to have all the vitality of a beached whale, having struggled to make any meaningful progress for more than a decade”.
“Current chief executive Nick Read has had a four-year crack at it but has obviously been constrained by the pandemic and a lot of economic uncertainty. Can he do something bold enough to make the market sit up and take notice, or is Vodafone doomed to a stagnant existence?”
Despite whispers about a potential merger with Three, Mould said the latest trading update “lacked the hoped-for major acquisition which could have really moved the dial”.
Read declined to comment on any press speculation, but said it would be “healthy” to have consolidation in the market.