- Growth remains in decline as customers switch away
- Biggest market Germany the chief culprit
- Vodafone shares have been a disaster for a decade
Sod’s law or poor planning? Mobile network Vodafone (VOD) has spent at least a decade expanding its footprint beyond its original UK backyard into much of Europe and elsewhere, so where is the odd bright spot among yet more soggy growth - the UK, of course.
Vodafone issued a revenue update for the third quarter to 31 December 2022, with declining growth across the board. Lower roaming and business use are blamed, and Germany, its largest single market these days, the chief culprit as customers continue to switch away.
Overall, Vodafone reported a 1.3% drop in Q3 revenues to €9.52 billion but interim chief executive Margherita Della Valle said Vodafone ‘must do better in the EU markets.’
‘The UK continues to stand out,’ said Megabuyte analysts, partly due to price rises and partly to customer growth, where revenues rose 5.3%, but still down on the 6.5% to 6.9% of the last two quarters.
BIG DECISIONS LOOM FOR VODAFONE
The FTSE 100 company faces some tough choices as it aims to reinvigorate growth while slashing its €45.5 billion net debt and maintaining its all-important dividend. That’s going to be a big ask for a company in leadership limbo.
Della Valle has only been in the job a matter of weeks after former CEO Nick Read was invited to push off at the end of 2022, and she remains, for now, a temporary appointment.
While Vodafone is sticking with its earnings guidance so far investors will be feeling an increasingly sense of threat to estimates.
Vodafone shares, down about 2% today (1 Feb) at 91.24p, are trading barely above all-time lows. True, it can be argued that risks are in the price given the implied income yield of around 8.5%, yet the company ‘has offered hopeless shareholder returns for more than a decade,’ said AJ Bell’s investment director Russ Mould.
Morningstar calculates that the stock has put up total returns of just 2.02% a year on average over the past 10-years. A basic FTSE 100 tracker has done three-times as well.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Steven Frazer) and the editor (James Crux) own shares in AJ Bell.
