Vodafone CEO hails 'turning point', but weaknesses remain

Vodafone CEO Vittorio Colao hailed the group's performance in the six months to end-September as an "important turning point" after it returned to organic service revenue and EBITDA growth.

Analysts from Jefferies International said the "overall takeaways are encouraging", but pointed out that there are "numerous moving parts" and that "German/UK results look a bit soft".

As a result of the solid showing in the first half of the group's financial year, Vodafone upgraded EBITDA guidance to £11.7 billion (€16.5 billion/$17.7 billion) to £12 billion for the full year (to end-March 2016), which Jefferies noted had been tightened from £11.5 billion-£12 billion previously.

"We are achieving 4G leadership in Europe, organic revenue growth in fixed and enterprise and sustained commercial momentum in emerging markets, all of which is consistent with our long-term strategy and which is being accelerated through our Project Spring investments. We also remain keenly focused on increasing efficiency and improving margins. We expect progress to continue in the second half of the year," said Colao.

In the financial first half-year, Vodafone reported a 1 per cent increase in group organic service revenue to £18.43 billion, although in reported terms revenue was down by 3.7 per cent. In Europe, organic service revenue was 1.3 per cent lower at £12.1 billion, while Africa, Middle East and Asia Pacific (AMAP) recorded a 6.4 per cent increase to £5.89 billion. Group organic EBITDA rose by 1.9 per cent to £5.79 billion, while the group posted a loss for the financial period of £1.584 billion.

The company also said that the period from July-September was the fifth consecutive quarter of improving revenue trends, with second-quarter service revenue growth of 1.2 per cent. Bloomberg noted that this also beat average analysts estimates of a 0.8 per cent increase.

However, revenue trends were still downwards in key markets such as Germany, with organic service revenue dropping 1.5 per cent in the first half to £3.822 billion. Jefferies noted that this was in part due to pricing pressure with contract mobile ARPU. Service revenue was also 0.1 per cent lower in the UK at £2.941 billion, which was attributed to a slowdown in consumer revenue related to new price controls on special numbers and Vodafone initiatives to reduce data bill shock.

Vodafone also said it now has 29.9 million 4G and 12.5 million broadband customers in Europe. It noted that it would report its financial results in euros from the 2017 financial year.

For more:
- see the Vodafone results statement
- see this Bloomberg article

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