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Vodafone: A self-justifying strategy

18 May 2023
Access report

Whilst Vodafone’s new strategy has some merits, its attempts to appease everyone involves inherent contradictions, ambiguity, and contrived attempts to prove its value as a conglomerate.

Its rapidly declining FCF outlook is calling dividend sustainability into question but there is much insistence that financial prospects will improve from here. We view this year’s guidance as achievable, but not easily so, and growth thereafter as on the optimistic side.

Corporate break-up is off the table for now with e& in the strategic driving seat and in empire-building mode. Consolidation in the UK and Italy remains on the agenda however, and arguably is the most tangible potential upside for investors.

Related reports

The path to approval opening up? Vodafone/H3G merger

4 May 2023

An announcement about the mooted merger of Vodafone’s UK operations with Three appears imminent, paving the way for an ultimate CK Hutchison exit.

The combination has the potential to transform the fortunes of two struggling operators, with deal upside predicated on cost synergies rather than on rising prices (which we do not foresee).

It is all to play for in regulatory clearance terms, with Ofcom expected to take a neutral stance and a seemingly open mind from DSIT, but the CMA is not yet demonstrating the more pro-business approach that was hoped for with the new regime.

Access report

Vodafone: Changing tack, if not direction

6 February 2023

Pressure to deliver guidance is suppressing commercial activity which in turn is making guidance more challenging to reach. Although the dividend is well covered for now, the deteriorating cashflow outlook is unhelpful.

The change in strategy to give autonomy to country markets and to be more customer-centric has its merits but is not consistent with many Group initiatives and will take a long time to bear fruit.

Vodafone reiterated its intention to merge with H3G in the UK. Recent setbacks to approval prospects may not be as detrimental as they appear, and there is much to be gained with the potential to increase cashflow four-fold.

Access report

Consolidation dominates as the sector flatlines: European mobile in Q4 2021

6 April 2022

European mobile revenue growth was zero for the third successive quarter with better mobility but less roaming upside, some B2B weakness, and stronger competitive intensity in the Italian and Spanish markets

Q1 should evidence some similar trends but the impact of out-of-contract notifications will begin to emerge and roaming looks set to become a significant boost from Q2

Consolidation fever continues to dominate the headlines though this is set against a backdrop of considerable uncertainty regarding regulatory approval

Access report

  • The path to approval opening up? Vodafone/H3G merger

    4 May 2023

    An announcement about the mooted merger of Vodafone’s UK operations with Three appears imminent, paving the way for an ultimate CK Hutchison exit.

    The combination has the potential to transform the fortunes of two struggling operators, with deal upside predicated on cost synergies rather than on rising prices (which we do not foresee).

    It is all to play for in regulatory clearance terms, with Ofcom expected to take a neutral stance and a seemingly open mind from DSIT, but the CMA is not yet demonstrating the more pro-business approach that was hoped for with the new regime.

    Access report

  • Vodafone: Changing tack, if not direction

    6 February 2023

    Pressure to deliver guidance is suppressing commercial activity which in turn is making guidance more challenging to reach. Although the dividend is well covered for now, the deteriorating cashflow outlook is unhelpful.

    The change in strategy to give autonomy to country markets and to be more customer-centric has its merits but is not consistent with many Group initiatives and will take a long time to bear fruit.

    Vodafone reiterated its intention to merge with H3G in the UK. Recent setbacks to approval prospects may not be as detrimental as they appear, and there is much to be gained with the potential to increase cashflow four-fold.

    Access report

  • Consolidation dominates as the sector flatlines: European mobile in Q4 2021

    6 April 2022

    European mobile revenue growth was zero for the third successive quarter with better mobility but less roaming upside, some B2B weakness, and stronger competitive intensity in the Italian and Spanish markets

    Q1 should evidence some similar trends but the impact of out-of-contract notifications will begin to emerge and roaming looks set to become a significant boost from Q2

    Consolidation fever continues to dominate the headlines though this is set against a backdrop of considerable uncertainty regarding regulatory approval

    Access report