Shares in Vodafone fell on Tuesday after the telecoms giant swung into a loss in the first half of 2024, despite returning to growth in its biggest market, Germany, in a shift that was hailed as a positive sign of a turnaround for the struggling FTSE 100 firm.
Vodafone saw firm-wide revenues drop 4.3% to €21.9 billion ($27.2 billion) in the first half of 2024, as it posted a €155 million loss and kept its dividend level at 4.50 euro cents per share.
Shares of London-listed Vodafone
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fell 4% on Tuesday having lost 27% of their value over the previous 12 months.
The London firm reported that its German segment, which accounts for 31% of its service revenues, started growing again in the second quarter, following a series of contractions throughout 2023 related to new laws that ban the selling of bulk TV contracts.
German TV laws, which come into force in July 2024, block companies from bulk selling TV contracts to housing association run multi-dwelling units (MDU). Vodafone has 8.5 million MDU TV customers that generate annual revenues worth €800 million.
The German division’s return to growth was vaunted by CEO Margherita Della Valle as an indication of the successes of her efforts to transform the comkpany. She declared in May that “Vodafone must change” while vowing to cut 11,000 jobs in a bid to “simplify” the company.
Commenting on Vodafone’s first-half results, Della Valle, who took up her position in January 2023, said the company’s transformation was “beginning to bear fruit, although much more needs to be done.”
Vodafone’s return to growth in Germany follows news on Oct. 30 the company had agreed to sell its struggling Spanish business, which generates 9% of service revenues, to London-headquartered company Zegona Communications, in a deal worth up to €5 billion.
The situation leaves Vodafone’s Italian arm, which accounts for 11% of service revenues, as the only segment of its business that is currently getting smaller, as sharp price competition hit the division’s mobile services revenues.
Della Valle told reporters on Tuesday that Vodafone is now ” considering a range of options” for its Italian unit, following reports in Italian newspaper Il Sole that the company is planning to sell off the business, with possible buyers including Fastweb and Iliad .
Vodafone’s U.K. business, which generates 15% of service revenues, posted second-quarter growth of 5.5%. The firm said it aims to further strengthen its position in the U.K. market by merging its U.K. business with Three UK .
Analysts, however, remained skeptical as they argued Vodafone’s financial performance failed to match up to the positivity contained in Della Valle’s statements.
“Vodafone’s results are a checklist of everything bad about a company. It has swung to a loss-making position, revenue is down, the dividend is not growing and there is negative free cash flow,” said AJ Bell analysts, led by Jack Pattison.
“We’ve got the usual rhetoric from the chief executive that the turnaround story is making progress but at the end of the day it’s yet another set of results that remind us how Vodafone has lost its way big time. Work is underway to restructure the group but don’t hold your breath for rapid change,” said Pattison.
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