Vodafone growth boost as UK merger with Three starts to pay off
Vodafone reported a solid start to its financial year, with growth in revenue and profits underpinned by the recent completion of its UK merger with Three, now consolidated into its results.
The deal has created the UK’s largest mobile operator and delivered a double-digit boost to local revenues in the first quarter.
“We are making a fast start to integrate the businesses, and the combination of our networks and spectrum will deliver a significant step change in experience for over 28 million customers up and down the country”, said group chief executive Margherita Della Valle on Thursday’s results call.
The FTSE 100 telecoms giant reported a 3.9 per cent rise in group revenue to €9.4bn (£8.15bn) for the first quarter, with adjusted EBITDAal – its preferred profit measure – climbed 4.9 per cent on an organic basis, to €2.7bn.
Group service revenue rose 5.3 per cent to €7.9bn, driven by the consolidation of Three UK and strong growth in Africa, despite continued drag from Germany.
Vodafone’s recently finalised, long-awaited merger with Three drove total revenue in the UK up 14.5 per cent year on year, to €1.93bn.
The deal, which was completed on 31 May, has produced ‘VodafoneThree’ – now the country’s largest mobile network with 28.8 million customers.
VodafoneThree has wasted no time post-merger, rolling out network integration that has already delivered up to 40 per cent faster 4G speeds for around seven million customers.
The company said it expects the integration to remove 16,500 square kilometres of mobile ‘not spots’ across the UK by year-end.
“Already for a month now, the Three base has experienced speeds up to 40 per cent higher. That’s a massive change all across the country”, Della Valle added.
“We have also started bringing together the networks… this will eliminate the not spots that the Three and Vodafone customers are experiencing in a quite drastic way already this year”.
Beyond VodafoneThree merger
Service revenue in the UK rose 15.2 per cent to €1.65bn, although organic growth came in at a more muted 0.9 per ecnt, as legacy business contract terminations and lower prices weighed on performance.
Vodafone Business revenue dipped three per cent on an organic basis, but fixed-line broadband continued to shine, adding 44,000 new customers in the quarter.
“The UK’s performance and outlook are entirely in line with our business plan, and we expect to see good EBITDA and free cash flow growth this year and over time”, she added.
The company reiterated its full-year guidance, forecasting adjusted EBITDAal between €11.3bn and €11.6bn and free cash flow of €2.4bn to €2.6bn.
The update comes just weeks after Vodafone received a £342m cash injection from Virgin Media O2, in exchange for a tranche of radio spectrum.
The deal forms part of a wider network sharing pact that will see VodafoneThree and Virgin Media O2 jointly deploy infrastructure over the next decade.
The spectrum deal is expected to ease congestion and improve connectivity in key regions including London, where concerns over patchy 5G rollout have put pressure on the industry.
VodafoneThree plans to invest £11bn in UK network upgrades over the next ten years, a move executives say will place the UK “at the forefront of European connectivity”.