Vodafone sees ongoing growth as it progresses with simplification

Vodafone reported continued organic service revenue growth in its third quarter on Wednesday, up 0.8% to €9.73bn (£8.25bn), accelerating from 0.7% in the second quarter.

The FTSE 100 telecoms giant said performance in Europe remained the same, falling 1.4% in the three months ended 31 December to €7.59bn, as it did in the second quarter, with ongoing recovery in Spain and acceleration in the UK offset by a tougher prior year comparison in Italy.

Retail revenues grew in Germany, it added, which was supported by strong cable broadband net adds.

There was also good growth reported in its rest of world geography, rising to 9.1% in the third quarter to €2.05bn, from 8.9% in the second, as continued recovery in South Africa was partially offset by lower growth in Turkey.

On an ordinary basis, group revenue was up 6.8% at €11.75bn, with Europe rising 10.1% to €8.97bn and rest of world slipping 2.7% to €2.48bn.

Vodafone said it made “good progress” on strategic priorities during the quarter, reporting a decline in Europe mobile contract churn year-on-year for a fifth successive quarter, supporting 0.51 million mobile contract net additions.

More than 0.4 million next-generation network (NGN) broadband net additions occured in Europe during the period, and the company said it was the first in Europe to make Amazon Web Services ultra-low latency mobile edge computing available over its 5G networks.

The board also said it made progress on its “radical simplification and digital transformation” strategy, with three million consumer customers now on simplified speed-tiered unlimited data plans.

It said it was on track to achieve its €0.4bn net operational expenditure reduction target in Europe for the 2020 financial year.

Vodafone also made improvements on its asset utilisation, with further progress reported on mobile network sharing.

Detailed talks were being held with Deutsche Telekom in Germany to address 'grey spots', and the company was in exclusive talks with NOS in Portugal.

Looking at its towers monetisation plans, the firm said it was on track to operationalise its European TowerCo by May, with senior management now appointed.

The INWIT merger in Italy had been notified to the European Commission, with a decision due by the end of February.

Looking at its portfolio, a memorandum of understanding had been agreed over the sale of Vodafone’s 55% shareholding in Vodafone Egypt for €2.2bn, implying a September 2020 last 12 months multiple of 7.0x adjusted EBITDA.

It also reached an agreement to sell Vodafone Malta for €250m.

The board reiterated its full-year guidance for adjusted EBITDA to be between €14.8bn and €15.0bn, with pre-spectrum free cash flow to come in around €5.4bn.

“I am pleased with the pace at which we have executed our commercial and strategic priorities, which has allowed us to maintain our momentum in the quarter,” said group chief executive Nick Read.

“Competition in Europe remains challenging, primarily in the value segment, however we continued to improve customer loyalty and to grow in broadband, and we achieved good growth in Africa.

“We expect a further gradual improvement in service revenue growth in the fourth quarter, led by Europe.”

Rad noted that the company recently announced the proposed sale of its stake in Vodafone Egypt, which he said would simplify the group into two scaled regional platforms - Europe and sub-Saharan Africa - and reduce its net debt.

“We have also appointed the senior management team for our European TowerCo, and we are preparing for a potential initial public offering in early 2021.”

At 0827 GMT, shares in Vodafone Group were up 0.97% at 152.7p.