
- Vodafone has reported decent growth for its fiscal third quarter
- All but one of its reported markets contributed to its overall 5.2% increase in group services revenues
- Unfortunately, the one exception if Vodafone’s biggest single market, Germany, where the telco is facing numerous challenges
- The ongoing decline in that market has dragged down Vodafone’s share price
Vodafone Group CEO Margherita Della Valle has achieved a number of her stated aims since she took the helm almost two years ago, particularly those related to asset sales and, at a group level, Vodafone’s numbers look fairly decent: But Della Valle’s dream of turning around the telco’s operations in its single biggest market, Germany, is becoming something of a nightmare if the operator’s fiscal third-quarter report is anything to go by.
For the three months to the end of December 2024, Vodafone reported group organic (like-for-like) service revenue growth of 5.2% to €7.93bn – these days that’s an enviable statistic for a communications service provider.
The growth in those like-for-like numbers have been helped by Vodafone’s sale of some of its less well-performing European operations in the past year, namely those in Spain, which was sold to Zegona, and Italy, which was sold to Swisscom.
And examining the operator’s trading update report, there’s much to cheer, with Vodafone’s operations in the UK, Turkey, Africa and smaller European markets (combined as ‘Other Europe’) all reporting an uptick in year-on-year service revenues. And on top of that, the UK operation will soon have greater scale once the £16.5bn merger of Vodafone UK and Three is completed, which should happen in the next few months – see Vodafone UK-Three mega-merger rubber-stamped by UK competition watchdog.
But then there’s Germany, which accounts for just over one-third of Vodafone Group’s entire service revenues – and it’s still in bad shape.
For the fiscal third quarter, Vodafone Germany reported service revenues of €2.7bn, down by 6.4% year on year. And there are no stars in the operation’s portfolio. Mobile service revenues dipped slightly year on year (by just 1%) to €1.26bn, but fixed service revenues slumped by 10.7% to €1.45bn due to a combination of lower pay-TV revenues and a shrinking fixed broadband customer base. The biggest impact came from the lower pay-TV revenues following the new regulations (in effect since July 2024) related to TV service provision in multi-dwelling units (MDUs). Vodafone Germany previously had a captive market but the regulation change now allows consumers to select whichever provider they want and, subsequently, Vodafone Germany has lost more than half of its previous MDU pay-TV customers, leaving it with 4.1 million, a decline that will cut about €400m in revenues from Vodafone Germany’s annual turnover.
Della Valle is putting on a brace face with regards to the situation in Germany. In her prepared remarks, she noted that Vodafone’s business in Germany is “impacted by the TV law change. We are continuing to invest in the turnaround of our German business and we are starting to see improving customer trends, although conditions have become more challenging in the mobile market.”
The CEO has drafted in a new management team in Germany, where costs are being cut through a headcount reduction of 3,100 staff, but the business looks some way off becoming a turnaround story and 2025 looks like it’s going to be a tough year.
The ongoing decline in Germany overshadowed performances elsewhere in the group, and Vodafone’s already-under-pressure share price took a hit on the London Stock Exchange, dipping by 7.5% to 64.8 pence.
Della Valle is sticking to her guns, though, and reiterated that Vodafone is “on track to grow in line with our full year guidance for this year” of adjusted earnings before costs and taxes of €11bn, “and [we] are looking forward to a stronger Vodafone in the years ahead.”
Those years can’t come soon enough for the CEO and the company’s shareholders.
- Ray Le Maistre, Editorial Director, TelecomTV
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