VodafoneThree's launch incorporates a number of swift and astute commercial decisions, which is particularly welcome given the challenging balancing act that the company needs to perform

The network upside will be felt quite quickly for Three customers primarily, with protection for Vodafone customers built in. Longer-term, the Government policy shift towards better coverage may require investment beyond the committed £11bn plan 

We view some moves as helpful to prospects in the broadband market, others less so, and continue to have question marks about the attractiveness of this segment for VodafoneThree

BT hit its FY25 guidance of a modest revenue decline coupled with modest EBITDA growth, and expects more of the same in FY26.

The highlight of the results was consumer broadband returning to subscriber growth despite the altnet onslaught; the lowlight was an increasing decline in Openreach broadband subscribers thanks to other Openreach customers (e.g. TalkTalk) not doing so well.

BT’s longer-term outlook and prospects for a dramatic cashflow turnaround remain strong, with Openreach net losses much more likely to improve than worsen over the next year, and further steps taken to divest/isolate erratic non-UK business segments.
 

Germany suffered a sizeable EBITDA decline in the 2H of FY25, and guidance for European EBITDA next year implies another tough year in FY26 with an underlying 5% decline for Europe as a whole excluding 1&1.

Elsewhere, the UK had a very solid FY25 and is a good news story for the Group with the merger with Three in prospect, but the Rest of World’s contribution is likely to diminish from here.

Various one-offs will support the outlook for next year, but operational execution is at the core of Vodafone’s raison d’être. Beyond some encouraging KPIs, investors continue to await meaningful evidence of such.

The slowdown in telecoms traffic volume growth post-pandemic has persisted for far longer than a simple hangover effect would imply, and has spread from fixed broadband to mobile in many markets

The eventual emergence of the metaverse and/or AI-generated traffic may mitigate this trend, but it is hard to see growth ever returning to a sustained 30%+ per annum level, with around 10-15% likely to prove the new normal

While far from disastrous for telcos, it does have important implications, such as the need to structure pricing more carefully, focus on network quality over capacity, and be more wary of the threat (or opportunity) from MVNOs, FWA and satellite

Geopolitical clashes between the US and Europe were a barely concealed undercurrent at this year’s MWC, with European tech regulation at odds with US moves, and telcos pitching for regulatory favours on firmer ground than they have had for years.

Perhaps the largest impact is on the satellite industry, with Eutelsat OneWeb having been given a new lease of life as the EU champion versus a now disfavoured SpaceX/Starlink.

AI was of course the talk of the town, but largely in ways that are tangential at best to traditional telcos, with the necessary building blocks for telcos to play a big role (i.e. network APIs) still needing much work.

BT had a solid-but-mixed Q3, with revenue growth slightly weaker than expected, EBITDA growth slightly stronger, and subscriber net adds a touch weak across broadband, mobile and Openreach 

The outlook is buoyed by a likely altnet slowdown at some point in FY26, with this set to help subscriber numbers at Consumer/Openreach and pricing at Consumer

The main cloud is the potential effect of a merged Vodafone-Three challenging BT/EE for best network and boosting MVNOs, a challenge we feel is real but manageable for BT

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.

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.

Providing home broadband connections via a mobile network (FWA) is gaining traction in certain markets where local conditions make it a viable alternative to fibre, such as New Zealand, Italy and the US.

FWA is a time-limited opportunity for most, with mobile traffic growth absorbing capacity for it and fixed traffic growth depleting the economic case. An ultimate shift to fibre is the best exit strategy.

In the UK, H3G's spare capacity could support up to 1 million FWA customers on a ten-year view—enough for a meaningful revenue fillip for H3G, but not enough to seriously disrupt the fixed market.