Service Revenue Beats Expectations on German Turnaround
Vodafone just proved it can bounce back from a tough year. The biggest driver was Germany, Vodafone's largest market, where service revenue rose 1.2%.
That might not sound like much. But it matters because Germany was a real headache for Vodafone. A law passed in 2024 stopped landlords from bundling TV and broadband services into rent.
That change cost Vodafone millions of customers. The company is recovering by offering broadband connections and mobile bundles. It seems to be working.
The numbers look even better when you zoom out. Across Africa, Vodafone's service revenue jumped 12.6%. That includes results from its South African unit Vodacom and Safaricom, East Africa's largest telecom provider, which Vodafone now owns a majority of.
Job Cuts and a New Billionaire Investor
During the quarter, the company eliminated over 1,200 positions across European markets. It has also sold off assets in Spain and Italy.
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French billionaire Xavier Niel paid $6 billion for a stake of more than 16% in Vodafone in July, then bought more shares within a week. He bought the stake from Emirates Telecommunications Group.
Vodafone's share price increased 3.7% to 118.80 pence as of 8:15 a.m. in London. Over the last 12 months, the stock has climbed more than 30%.
Forecast
Vodafone now expects adjusted operating profit (after lease expenses) to land between €13 billion and €13.3 billion for the fiscal year ending in March, approximately $14.8 billion to $15.2 billion. A Vodafone spokesperson said, "We expect to reach the higher end of that range."
The bottom line: Vodafone is making progress in Germany while growing in Africa.
Background on the 2024 Law and Recovery Strategy
This had been a reliable source of bundled customers for Vodafone, but the change forced the carrier to compete directly for individual subscribers. To counteract the customer losses, Vodafone began aggressively marketing standalone broadband plans and discounted mobile-broadband combo offers.
The recent quarterly results from Germany signal that these initiatives are starting to work, despite intense competition from Deutsche Telekom and others. Meanwhile, the company's asset sales in Spain and Italy - and the job cuts across Europe - are part of a broader cost-reduction plan aimed at streamlining operations and improving cash flow. The investment from Xavier Niel, founder of French telecom Iliad, adds further credibility to Vodafone's recovery story, as the billionaire has a track record of turning around telecom assets.
What the Restructuring Means for Vodafone
The job cuts and asset disposals are part of a wider strategic shift under CEO Margherita Della Valle, who took the helm in 2023. The company has been refocusing on its core markets in Europe and Africa while divesting underperforming units. The sale of Vodafone's Spanish business to Zegona Communications and the Italian unit to Swisscom, combined with the workforce reductions, are expected to generate significant cost savings and improve free cash flow. Xavier Niel's increased stake signals confidence from a seasoned telecom investor who has successfully turned around Iliad and other assets, and his involvement could pave the way for further consolidation in the European telecom sector.
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