- Service revenue of €9.4bn reflected organic growth of 4.7% (2.5% excl. Turkey)
- Growth in 14 out of 17 markets
- Full year guidance reiterated
Matt Britzman, equity analyst, Hargreaves Lansdown:
“Vodafone’s third quarter had some pockets of optimism for investors to cling to. Growth was in line with the second quarter, arguably a better result than some had feared. The key German market managed to scrape its way into growth territory but saw a slowdown. Comparisons to the second quarter were always going to be tough, with some non-recurring revenue streams not repeating. Regulatory changes in Germany are set to kick in this year, adding a layer of uncertainty to operations in the region.
Streamlining the business remains a top priority and potential deals in Italy are still on the table. There’s scope for upside in the region if a deal can be found, but whether that would translate to a meaningful share price reaction remains to be seen. Deals in the UK and Spain failed to stir up too much excitement.
Vodafone looks cheap by most measures and with a forward yield of 9.2% it’s easy to see the attraction. But an argument can be made that the dividend is under some pressure in the near term. The Spanish sale, while a positive move for earnings given it’s a loss-making region, will be a hit to free cash flow. A capital allocation review is on the cards post-completion, and some analysts are already pencilling in dividend cuts as a result.
