(Bloomberg) — Vodafone Group Plc delivered sales growth narrowly ahead of estimates in the first quarter after UK growth helped offset weakness in its biggest market, Germany.
- Organic service revenue rose 2.5% in the quarter that ended in June, the Newbury, England-based phone company said in a statement on Monday, versus the 2.4% gain forecast by analysts surveyed by Bloomberg.
- A 6.5% jump in UK sales came partly from price rises and a rebound in holiday roaming revenue post Covid restrictions, while the group tries to move past issues with new customer re-contracting regulations at Vodafone Deutschland, where service revenue fell 0.5%.
Key Insights
- The group reiterated its outlook for 2023 adjusted earnings between 15 billion euros ($15.3 billion) and 15.5 billion euros before interest, tax, depreciation and amortization after leases, and adjusted free cash flow of about 5.3 billion euros.
- Vodafone has a “near-term focus” on deal opportunities for its European operating companies as well as with infrastructure arm Vantage Towers, Chief Executive Officer Nick Read said in the statement on Monday. Earlier in July, rival Deutsche Telekom AG agreed to sell a majority stake in its towers unit, valuing the business at 17.5 billion euros, one of the largest such deals this year.
- On a call with reporters, Read said market turbulence added “complexity” to potential deal talks. “We have on towers very good engagement with a number of partners and we are advancing those discussions,” and “on our fiber JV in Germany we’re seeing very strong demand.” He declined to elaborate on consolidation talks.
- The company warned in May that inflation could hurt growth in the next year, adding pressure to Read’s attempts to consolidate Vodafone’s business and improve returns.
- High inflation at Vodafone’s smaller Turkish business also boosted revenue.
- Chief Financial Officer Margherita Della Valle estimated energy costs are currently on track to be about 300 million euros higher than last year’s. That was an increase from the company’s previous estimate of an additional 200 million euros in energy costs.
Market Context
- Vodafone shares were little changed at 9:15 a.m. in London.
- Vodafone shares have gained 15% this year through Monday, versus a 1.5% loss in the FTSE 100 and a 0.8% loss in the Stoxx 600 Telecommunications Index over the period.
- Of 26 analysts surveyed by Bloomberg, 15 rate the stock Buy, 9 Hold and 2 Sell.
Get More
- Statement
- NOTE, June: Vodafone’s Mobile Phones Were the Future Once. Now What Happens?
(Updates with management comments starting in fifth bullet point)
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