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Vodafone has reported better than expected quarterly service revenues, but a shrinking customer base in Germany underscored the turnaround challenge faced by the telecoms group’s new chief executive.
Group service revenue — a measure that includes sales from contract payments, network use and roaming — rose 3.7 per cent to €9.1bn in the three months to June 30 from a year earlier, as the UK-based telecoms company raised prices in its home market and increased customer numbers. This was above an average estimate of 2.9 per cent, according to consensus data compiled by Bloomberg. The group’s enterprise division which provides cloud and cyber security services to companies also boosted revenue.
Germany — Vodafone’s biggest market, accounting for almost a third of sales — posted a fifth consecutive quarterly decline in service revenue though this had narrowed to a drop of 1.3 per cent, with the group reporting €2.8bn thanks to a broadband price increase.
However, the increase in pricing has resulted in a loss of more than 120,000 customers for broadband services. “We expect ongoing gradual improvement in our service revenue performance in Germany,” said Margherita Della Valle, who became chief executive in April. Referring to the group’s overall turnaround, she said: “Looking ahead . . . we have much more still to do.”
Della Valle told the Financial Times that she was not worried by the loss of customers in Germany as they have the right to disconnect for a period of time following their broadband price increase. “We shouldn’t be worried because it’s a very small number in the context of our [10mn customers] base,” she said.
Vodafone also announced that Luka Mucic would become chief financial officer in September, filling the post vacated by Della Valle. Mucic was formerly the finance chief at German software company SAP.
Vodafone is ratcheting up its restructuring efforts across Europe following years of underperformance. Shares have fallen 40 per cent over the past 12 months compared with a 5 per cent gain in the FTSE 100, leading in part to the departure of former chief executive Nick Read.
Investors want the group to simplify its structure and revive its performance in Germany. The company announced in May that it would axe 11,000 jobs, or 12 per cent of its global employees, over the next three years.
Performance in Italy and Spain improved and Della Valle said services there would “benefit from consolidation.” Shares in Vodafone were up 4.4 per cent in morning trading.
Matthew Dorset, equity research associate at Quilter Cheviot, said that the group’s latest set of results is “mixed.”
Vodafone also defended its recently agreed deal with rival Three to merge and create the UK’s largest mobile operator, although the agreement is to be investigated by the Competition and Markets Authority.
Referring to the CMA’s initial decision in April to block Microsoft’s $75bn Activision Blizzard deal over concerns about its impact on competition in the cloud gaming market, Vodafone’s UK boss Ahmed Essam said: “We believe in how [the Vodafone-Three deal] adds competition in the market . . . if you look into the Microsoft case, it’s a completely different case.” Microsoft and Activision Blizzard are now exploring a modified version of their merger to appease UK regulators.
