Vodafone shares fall 5% following trading update

Vodafone shares fall 5% following trading update

Vodafone narrowly missed a consensus analyst forecast for third-quarter revenue after competition in southern Europe continued to bite and it cut prices in South Africa, sending its shares down as much as 5%.

Service revenue fell 3.9% to €9.79bn in the three months to the end of December, narrowly below the average analyst forecast of €9.82bn in a company-compiled survey.

Organic service revenue rose 0.1%. Vodafone is sandwiched between big former monopolies and low-cost challengers in fiercely competitive markets and new CEO Nick Read is under pressure to stop its European business shrinking.

In Europe, organic service revenue fell 1.1% but the carrier said there were “improving customer and financial trends in Italy, robust retail growth in Germany, reduced churn in Spain, and a consistent performance in the UK”.

Goldman Sachs analysts noted the improved commercial trajectory in Italy and Spain, but said a rebound to growth was unlikely to happen before next year.

Vodafone needs regulators to clear its €8.4bn purchase of Liberty Global assets in central Europe so it can better compete with Deutsche Telekom. It has put its telecom towers into a separate business unit, which would make it easier to share masts with other carriers and cut costs.

Its shares have fallen by more than a third over the past 12 months, compared to a 14% drop in the Stoxx 600 Telecommunications index. And RBC analysts led by Wilton Fry say its dividend policy was “unsustainable”.

“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 the second quarter,” Vodafone said.

Meanwhile, Vodafone is suspending some equipment purchases from Huawei Technologies in another setback for the Chinese tech giant’s growth ambitions.

Vodafone, one of the world’s largest mobile carriers, will “pause” buying Huawei equipment for the core of its networks in Europe amid talks with the company and various agencies and governments, the company’s chief executive Nick Read said. There is too much “noise” around the situation and there needs to be more facts, he said.

Carriers are becoming wary of expanding their ties to Huawei amid a US-led crackdown. President Donald Trump’s administration has been pushing allies to block Huawei from fifth-generation wireless networks, citing fears China could use its equipment for spying, something its executives have denied.

Bloomberg

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