Vodafone Group beat analyst revenue predictions with strong growth in Africa, offsetting a decline in Germany, the telecommunications firm’s biggest market, where a recent law change is starting to bite.
Service revenue grew 5.4% to €7.5-billion (R150-billion) in the first fiscal quarter, the company said on Thursday. That beat the €7.36-billion average estimate of four analysts in a Bloomberg survey.
Service revenue in Africa grew 10% to €1.4-billion, supported by price increases in South Africa and strong momentum in Egypt, the company said.
The past year has marked a significant transition for Vodafone as CEO Margherita Della Valle embarked on a turnaround strategy, including selling off underperforming markets, cutting 11 000 jobs and scaling back a sprawling empire that at one point stretched from the US to Africa.
Since she formally took the reins last April, she’s overseen the sale of the company’s Spanish and Italian businesses and an attempted merger with CK Hutchison’s Three, currently undergoing reviews from the UK competition authority.
The UK-based operator is being hit by two major law changes in Europe.
Vodafone could lose half of the 8.5 million household contracts it holds in Germany after policymakers barred housing associations from bundling TV and internet subscriptions with rent, effective from July.
At risk
There are early signs that the law change in Vodafone’s largest market is starting to bite. Service revenue decreased by 1.5% in the quarter, after a brief rebound in the previous three months.
Its UK revenue and customer base could also be at risk after communications regulator Ofcom announced plans to ban mobile, broadband and pay-TV companies from imposing mid-contract, inflation-linked price hikes. Although those changes don’t come into effect until January, analysts have warned that it could start to impact customer contracts coming up for renewal this year.
Vodafone reiterated guidance of adjusted earnings before interest, taxes, depreciation and amortisation after leases of €11-billion and adjusted free cash flow of at least €2.4-billion.
“The actions we are taking now will deliver improved performance and underpin the turnaround of Vodafone,” Vodafone said in a statement.
Vodafone shares gained about 2.7% so far this year through to Wednesday’s close. — Jillian Deutsch, (c) 2024 Bloomberg LP