Vodafone revenues fall 7% to £9.5bn

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Vodafone ‘s third quarter revenue fell 6.8% to €11bn – the mobile phone retailer has revealed. However, strip out foreign exchange movements, asset sales and accounting changes, and organic service revenue rose 0.1%.

The announcement is behind growth of 0.5% in Q2, but Vodafone has left guidance unchanged.

The shares moved marginally lower on the news.

Nick Read, Group Chief Executive, commented: “We have executed at pace this quarter and have improved the consistency of our commercial performance. Lower mobile contract churn across our markets and improved customer trends in Italy and Spain are encouraging, however these have not yet translated into our financial results, with a similar revenue trend in Europe to Q2. We enjoyed good growth across our emerging markets with the exception of South Africa, which was impacted by our pricing transformation initiatives and a challenging macroeconomic environment. Overall, this performance underpins our confidence in our full year guidance.

“We are moving to implement a radically simpler operating model and to accelerate our digital transformation, as demonstrated by the organisational changes we have announced in Spain and the UK. We are also assessing opportunities across our markets to improve asset utilisation through partnering.

“This week we announced the intention to extend our existing network sharing agreement with Telefonica O2 in the UK to include 5G services. This will enable us to deploy 5G services to more customers over a wider geographic area, and to do so at a lower cost. After these arrangements have been finalised, we also intend to explore opportunities to monetise our UK tower assets”.

George Salmon, Equity Analyst at Hargreaves Lansdown commented:“If Nick Read goes ahead and sells the UK towers assets, Vodafone’s attention will be squarely focused on its mobile and broadband offerings. That might sound sensible, but there are two obvious problems.

There’s not much to choose between the different providers these days, other than the price they charge. That makes them particularly vulnerable to competition, something Vodafone’s found out the hard way in markets from India to Italy.

We also can’t help but feel part of the motivation for selling the towers businesses would be to shore up a balance sheet that’s creaking under the weight of close to €30bn of net debt.

So, while a yield of close to 9% will surely turn a few heads, investors shouldn’t forget the combination of weak revenue growth and a balance sheet laden with debt mean these are testing times for Vodafone.”

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