Vodafone shares slump as headwinds grow in key German market
Vodafone shares have plunged more than six per cent in early trade this morning after the FTSE 100 giant reported its third-quarter results.
While the group reported overall service revenue growth of 5.2 per cent in the third quarter, beating the average analyst estimate of 4.2 per cent, it noted the migration of 1&1 customers in Germany has been slower than expected.
The FTSE 100 firm posted an increase in adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of 2.2 per cent to €2.8bn (£2.3bn) for the quarter.
Vodafone also reiterated its guidance for full year adjusted EBITDA of approximately €11bn and an adjusted free cash flow of at least €2.4bn.
Margherita Della Vale, the telecom giant’s chief executive, said: “With service revenue growth accelerating to 5.2 per cent, we are making good progress in our transformation”.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “The signal’s getting stronger at Vodafone, with service revenue growth exceeding expectations, thanks to dialled-up performance in the UK, Africa, and Turkey. But Germany remains a dropped call, weighing on overall performance.
“The €8bn Italy sale is in the bag, and the UK merger with Three has the green light, setting Vodafone up for a network-wide reboot with scale and cost synergies.
“With €2bn in share buybacks on speed dial and over €2.4bn in free cash flow expected for the year, the case for good returns is still alive and well – but investors will want to keep an ear out for static from Germany’s ongoing struggles.”
Vodafone’s UK merger
“The approval of the UK merger“, she said, marked “a significant reshaping of our portfolio”, Della Vale added.
In December 2024, the UK’s Competition and Markets (CMA) approved the merger of Vodafone UK and Three UK.
The transaction, which is now expected in the next few months, will create the UK’s largest mobile operator.
Vodafone will hold 51 per cent of the stake, with CK Hutchison, Three UK’s parent company, owning the other 49 per cent.
Ahead of today’s results, Albie Amankona, analyst at Third Bridge, commented:
“The Vodafone-three merger unlocks significant cost efficiencies trough network integration. By consolidating infrastructure, the new entity can reduce maintenance expenses and strengthen its competitive position against BT-EE and Virgin Media 02.”
However, she said, “Vodafone’s lack of exclusive content remains a weakness, as rivals continue to leverage propriety entertainment services to drive customer retention”.
Vodafone shares slump
Despite its strategic moves, the firm remains under pressure in an increasingly competitive market.
Its share price has struggled over the past decade, and while progress is evident, analysts remain divided on its long term outlook.
Vodafone’s share price plummeted 54.76 per cent in the last five years, but has been relatively stable in the last 12 months, up 4.39 per cent.
Richard Hunter, head of markets at Interactive Investor, added: “Vodafone’s transformation is well underway, but turning around a business of this scale takes time.”
He said: “The market remains cautious, with share price movements reflecting ongoing uncertainty. While there are signs of progress, the group still faces challenges in providing that its turnaround strategy will deliver sustained growth”.