Vodafone sales recovery continues, sees tower IPO in 2021

Vodafone shares rose as much as 3.1% in early trading, adding to a 7% gain in the 12 months to Tuesday.

Vodafone Group narrowly beat quarterly revenue forecasts after the $20 billion acquisition of cable assets from Liberty Global Plc strengthened the wireless carrier in fiercely competitive European markets.

  • Vodafone reported organic service revenue up 0.8% for its third quarter ended December 31 versus the 0.7% average of analyst estimates compiled by the company.
  • Vodafone said it’s preparing for a potential initial public offering of its European wireless towers in early 2021, as it moves more decisively to monetise its 62 000 masts.

 

Key Insights

  • Strong cable customer additions in Germany, where Vodafone makes about a quarter of its sales following last year’s Liberty deal, helped to offset the impact of price wars in southern Europe.
  • The revenue beat was also driven by improving sales in South Africa.
  • It was the second consecutive quarter of growth for Vodafone as Chief Executive Officer Nick Read tries to stabilise the business after a dividend cut last year. Read forecast a “further gradual improvement in service revenue growth” in the final quarter of its financial year, led by Europe.
  • He said he expects the new European tower business to be incorporated in Germany, with its headquarters in Dusseldorf. Analysts say the unit could be worth between 8 billion and 20 billion euros.

 

Market Reaction

  • Vodafone shares rose as much as 3.1% in early trading, adding to a 7% gain in the 12 months to Tuesday.
  • As of Wednesday, 18 analysts surveyed by Bloomberg rated the stock a Buy, six a Hold, and two a Sell

 

Get More

  • Read is trying to simplify the business, digitize labor-intensive operations and generate better returns from Vodafone’s tower infrastructure.
  • Read said Wednesday he had worked “very actively and at speed on the portfolio simplification” and that “it’s essentially completed with the disposal of Egypt.”
  • Organic service revenue strips out the impact of mergers and acquisitions and currency fluctuations to present performance on a comparable basis.
  • NOTE, BI: Vodafone Faces Cost Risks After BT’s Hefty Huawei Bill: React
  • NOTE, December. 30: Digital Colony Interested in Vodafone, Telefonica JV: Expansion

© 2020 Bloomberg

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