Vodafone Group returned to sales growth in the second quarter as its toughest European market of Spain showed signs of improvement, in a boost for CEO Nick Read.
Organic service revenue grew 0.7%, above the 0.2% forecast by analysts. It follows two quarters of declines. Vodafone also upgraded its full-year earnings earnings guidance.
Read needs some decent sales growth to generate cash for network investments and service debts built up with Vodafone’s purchase of Liberty Global assets.
South Africa, Italy and Spain all improved as Vodafone faced tough competition from former phone monopolies and no-frills challengers. The company said it had the best ever quarter for new customers in the UK.
Read said he expects to build upon the revenue growth in the second half of the year in both Europe and Africa. The company toned down its guidance on full-year free cash flow, while boosting its forecast for earnings after the Liberty Global deal.
Vodafone shares are up 11% in the year to Monday, outpacing a 4% rise in the Stoxx 600 Telecommunications Index, as investors welcomed Read’s plans to collaborate more with rivals on infrastructure to cut costs.
Buy rating
On Monday, 17 analysts surveyed by Bloomberg rated the stock a buy, six hold and two sell.
The company made a loss in its Indian business after a court ordered it to pay spectrum fee. It now sees group free cash flow of “around” €5.4-billion versus previous guidance of “at least” €5.4-billion.
Vodafone sees adjusted earnings before interest, tax, depreciation and amortisation of €14.8-billion to €15-billion, up from its previous guidance of €13.8-billion to €14.2-billion. — Reported by Thomas Seal, (c) 2019 Bloomberg LP
