Service revenue growth was broadly flat this quarter as some unwinding of price increases was compensated by a pickup in roaming revenues.

Vodafone has made some progress on its turnaround plan: it has sold its ailing Spanish unit; is rumoured to be in talks about a deal in Italy; and its German business is (just) back to growth (for now).

We expect muted guidance for 2024 with lower prospective price increases for most, inflated cost bases, and continued consolidation uncertainty.

Market revenue growth was robust in Q3 at 1.4%, but heavily supported by price rises whose effect will wane over the next year.

Broadband net adds remained negative, with pay TV and telephony more negative still, mainly thanks to strained consumer finances.

Declining volumes and waning price rise boosts are likely to lead the market into decline next year, with a recovering economy needed to reverse this.

With a difficult price rise adjustment now behind it, VMO2’s subscriber momentum is much improved, in part aided by accelerated network expansion.

Backbook pricing remains under pressure on the fixed network with revenues down 1.2% in spite of sizeable price rises and footprint expansion—upcoming OTS may exacerbate this issue.

VMO2 has thus far only countered the downside of the UK’s fibre revolution. A new approach to branding and expansion of its addressable market are upside opportunities—with the ultimate potential to even deliver improvements on its previous position.

Vodafone has struck a deal to sell its ailing Spanish business in a deal worth €5bn, equivalent to 5.3x EBITDAaL.

While the pragmatism of the move will be applauded, the valuation may be viewed as disappointing by some.

The deal removes an enduring drag on the company’s financials, providing scope for better European trends, but this is one of several challenges facing the company, with the dividend policy question now to the fore.

Service revenue growth almost doubled this quarter to 2.4% aided by price rises in the UK, Spain, and France, but remains well below inflation-levels.

The revenue boost from in-contract price rises will ultimately disappear as customers recontract, dampening the EBITDA outlook as costs continue to rise.

Operators are looking to other strategies to strengthen their positions, including edging up new-customer pricing, M&A, and attracting wholesale MVNO business.

Mobile service revenue growth finally got close to the rate of inflation this quarter, doubling to 7.5% as the operators benefitted from mid-teen price rises.

Growth will wane from here with expected revenue growth of 6% this calendar year and 3% next, with ongoing cost-inflation pressures.

H3G looks set to fare better than others on the top-line in 2024 but its profitability is looking somewhat irredeemable, with negative cashflow even with more normalised capex.

While VMO2's fixed price rises this year were always going to be quite tricky, the 1ppt boost to revenue growth was nonetheless disappointing on the back of price rises of 14%.

Both mobile and EBITDA performances were better, but H2 EBITDA growth will need to be considerably stronger to get to guidance levels, which will be all the more challenging with the loss of the Lycamobile MVNO.

With the erosion of VMO2's differentiators of split contracts and broadband speeds, growth at VMO2 will require addressing new parts of the market—both geographically and across the customer range.

Vodafone's headline revenue growth of +3.7% is actually a small decline once Rest of World exchange depreciation is accounted for. Europe, however, delivered an improving revenue trend to +0.4%, as signalled at Vodafone's FY results announcement.

The mix and operating trends are less positive, with growth driven by low-margin B2B, and subscriber losses accelerating in German fixed. Investors will be weighing up whether these results are green shoots of a recovery or another false dawn.

Although the company may reach its guided EBITDA on assumed exchange rates, it looks set to fall short in euro terms, which has implications for FCF and dividend cover.

Social tariffs have provided relief for some at a time of household income squeeze and otherwise unavoidable high inflation-driven telco price increases.

Adoption has risen but remains very low, limiting their effectiveness, and more widespread adoption would expose their shortcomings, with the risk of penalizing low cost operators and significantly increasing prices for non-adopters (by up to 20%).

A better approach might be to recognize that affordability issues are narrower but deeper than current social tariffs can address, with fuller, centrally funded subsidies targeted more narrowly at those most in need.

Service revenue growth dipped by 0.7ppts to 1.2% this quarter—a slightly disappointing performance given the price rises implemented in some markets.

The impact of price increases has been mixed, with little revenue benefit in France, somewhat better in Spain, and a shift to Iliad in Italy.

Q2 should be stronger, with the UK price rises kicking in, the promise of a turnaround from Vodafone Germany, but a waning of price rise benefits elsewhere.