Vodafone Sees Better Second Half After Virus Hits Roaming


Vodafone Group Plc beat estimates and expects sales to recover from a first half when Covid-19 lockdowns sent mobile roaming income tumbling.

  • Vodafone’s organic service revenue fell 0.4% in the financial second quarter that ended on Sept. 30, better than the 2.3% average estimate of analysts compiled by Bloomberg. Analysts at Jefferies noted strong results in Spain and the U.K.
  • Europe’s second-biggest phone company nudged up its outlook, seeing full-year adjusted earnings before interest, tax, depreciation and amortization between 14.4 billion to 14.6 billion euros ($17.1 billion to $17.3 billion), versus previous guidance of “flat to slightly down” on last year’s re-based total of 14.5 billion euros.

Key Insights

  • Investors are focused on proceeds from an expected initial public offering of Vantage Towers, the mobile mast unit spun out from Vodafone that could be one of the biggest European IPOs of 2021. The tower firm holds a capital markets day on Tuesday.
    • Vodafone is considering raising about 4 billion euros from the Frankfurt IPO, people familiar with the matter told Bloomberg last week.
    • The move is vital to Chief Executive Officer Nick Read’s effort to squeeze more value from Vodafone’s assets, pare down a 44 billion-euro debt burden and pay for network upgrades.
    • Read said on a call with reporters Vodafone intends to roll its stake in Cornerstone Telecommunications Infrastructure Ltd., a U.K. mast joint venture with Telefonica SA, into Vantage Towers, “ideally ahead of the IPO.”
  • Read said on the call that the telecom industry’s structure was improving, but that consolidation was needed: “We need local scale as much as European scale, and we need the two together. So where there’s an opportunity for a failing player in a market to leave that market, for a healthier structure, I think that should be encouraged.”
    • Read is trying to simplify Vodafone’s sprawling operations and stabilize results in difficult markets such as Spain; Reports in September of talks between Vodafone and Spanish rival Masmovil Ibercom SA led to speculation of a potential tie-up.
  • A “key focus for 2021” will be how the 20% of the European Union’s 750 billion euro Recovery Fund earmarked for digital initiatives will be distributed, Vodafone said in the statement.

Market Reaction

  • Vodafone shares rose 3.4% at 10:16 a.m. in London, and have been rising along with other stocks in recent weeks on optimism over a coronavirus vaccine. They are still down 15.8% in the year to date, versus a 14.3% fall in the Stoxx Europe Telecommunications index.
  • Of analysts surveyed by Bloomberg, 20 rated the stock a Buy, 4 Hold, and 2 Sell.

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  • Majority-owned subsidiary Vodacom Group Ltd. reinstated growth targets based on an expected economic recovery from the Covid-19 crisis in 2022, and said it has the financial strength to take part in a long-awaited auction of broadband spectrum in South Africa.
  • Read was joined by new chairman Jean-Francois van Boxmeer earlier this month.
  • Statement

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