Vodafone Sales Recovery Continues, Sees Tower IPO in 2021

(Bloomberg) --

Vodafone Group Plc narrowly beat quarterly revenue forecasts after the $20 billion acquisition of cable assets from Liberty Global Plc strengthened the wireless carrier in fiercely competitive European markets.

• Vodafone reported organic service revenue up 0.8% for its third quarter ended Dec. 31 versus the 0.7% average of analyst estimates compiled by the company.
• Vodafone said it’s preparing for a potential initial public offering of its European wireless towers in early 2021, as it moves more decisively to monetize its 62,000 masts.

Key Insights

• Strong cable customer additions in Germany, where Vodafone makes about a quarter of its sales following last year’s Liberty deal, helped to offset the impact of price wars in southern Europe.
• The revenue beat was also driven by improving sales in South Africa.
• It was the second consecutive quarter of growth for Vodafone as Chief Executive Officer Nick Read tries to stabilize the business after a dividend cut last year. Read forecast a “further gradual improvement in service revenue growth” in the final quarter of its financial year, led by Europe.
• He said he expects the new European tower business to be incorporated in Germany, with its headquarters in Dusseldorf. Analysts say the unit could be worth between 8 billion and 20 billion euros.

Market Reaction

• Vodafone shares rose as much as 3.1% in early trading, adding to a 7% gain in the 12 months to Tuesday.
• As of Wednesday, 18 analysts surveyed by Bloomberg rated the stock a Buy, six a Hold, and two a Sell

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• Read is trying to simplify the business, digitize labor-intensive operations and generate better returns from Vodafone’s tower infrastructure.
• Read said Wednesday he had worked “very actively and at speed on the portfolio simplification” and that “it’s essentially completed with the disposal of Egypt.”
• Organic service revenue strips out the impact of mergers and acquisitions and currency fluctuations to present performance on a comparable basis.
• NOTE, BI: Vodafone Faces Cost Risks After BT’s Hefty Huawei Bill: React
• NOTE, Dec. 30: Digital Colony Interested in Vodafone, Telefonica JV: Expansion

To contact the reporter on this story: Thomas Seal in London at tseal@bloomberg.net

To contact the editors responsible for this story: Thomas Pfeiffer at tpfeiffer3@bloomberg.net, Jennifer Ryan

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