Vodafone Group Plc reported second-quarter sales growth that beat analysts’ estimates after posting a surprise growth in service revenue in Germany, its biggest market, following price hikes.
Overall organic service revenue in the second quarter rose 4.7%, the Newbury, England-based phone carrier said in a statement on Tuesday. That compared with analysts’ average forecast of a 4.1% increase, according to estimates compiled by Bloomberg.
Chief Executive Officer Margherita Della Valle, who took the top job in April, is working to turn around the telecommunication giant’s share price, which has declined about 26% in the last 12 months. The company raised prices across its biggest European markets this year, increasing subscribers’ average monthly bills and taking the risk that customers would seek out lower-cost plans at rivals.
German service revenue grew 1.1% in the second quarter when analysts had expected a 0.5% decline. The higher priced plans helped offset a decline in device sales, an industrywide trend as customers hang on to smartphones for longer.
Della Valle, who has said the makeover will “not be a quick fix,” also oversaw 2,700 job cuts in the first half of the year, part of a program to reduce employee numbers by 11,000 that she announced in May.
She’s also agreed on two major deals this year: a buyout of its British venture with CK Hutchison Holdings Ltd., and a sale of its long-challenged Spanish unit.
Vodafone’s better-than-expected 4.7% organic service-revenue growth in fiscal 2Q shows that the strategic pivot to focus on customer satisfaction and value vs. volume is paying off. The result reflects broad-based acceleration, due to price hikes and better mobile operational performance. Ebitda is soft on energy costs, rising 0.3% in 1H, but healthy top-line evolution supports some upside to the reiterated full-year flat target before currency impacts. Erhan Gurses, BI telecoms analyst
The carrier said it expects adjusted earnings before interest, taxes, depreciation and amortization and after leases to remain “broadly flat” at €13.3 billion ($14.2 billion) for the fiscal year ending in March 2024. That compares with analysts’ €13.2 billion forecast, according to the average of estimates compiled by Bloomberg. The company also reiterated its dividend.
Vodafone’s earnings follow a relatively positive quarter from its biggest competitors. Orange SA’s earnings rose, Telefonica SA set out a multiyear plan to increase profits, and Deutsche Telekom AG, which also owns a majority of T-Mobile US Inc., upgraded its earnings guidance.
Vodafone’s majority-owned African subsidiary Vodacom Group Ltd. reported earnings for the first half that missed analysts’ estimates on Monday. But its acquisition in Egypt pushed up revenue and cemented it as Africa’s most valuable mobile operator.
Vodafone’s shares rose 1.3% to close at 77.40 pence in London trading on Monday. The stock had declined 8.1% this year. That compares with a 2.6% gain in the Stoxx 600 Telecommunications Index of European companies. Bloomberg