Vodafone maintains guidance on back of huge boost in mobile customers

Vodafone is on track to meet its full-year guidance following healthy customer and sales growth in the UK and Africa, the telecoms giant said on Wednesday. 

The blue-chip listed business recorded a 3.7 per cent year-on-year increase in organic revenue for the final three months of 2021 as its customer base expanded and remained more loyal.

African mobile arm Vodacom saw the greatest rise in revenues, jumping 11 per cent, thanks to a substantial upsurge in mobile customers and those using its M-Pesa money transfer platform.

In South Africa, the group added 1.7 million prepaid and 82,000 mobile contract customers, posted a strong gain in financial services revenue and had its recently-launched VodaPay’ super-app’ downloaded more than 1.4 million times.

Its UK division also witnessed strong growth in mobile contract customers, which it attributed to its new ‘Vodafone EVO’ flexible contract, healthy sales of iPhones and a positive Black Friday campaign.

Trade was further bolstered by a 1.9 percentage point fall in customer churn rates, greater roaming and visitor revenues, and its broadband customer base surpassing the one million mark.

This helped offset a decline in business revenue after the termination of an unprofitable contract with a major multinational, as well as difficulties getting other multinationals to renew contracts.

By contrast, Vodafone’s largest market of Germany achieved record-high loyalty rates in its business segment. On top of that, it revealed a 378,000 increase in Internet of Things connections on the back of hefty demand from the car industry.

Its  service revenue in the country grew by 1.1 per cent despite more onerous Covid-19 restrictions causing store footfall to decrease to half its pre-pandemic levels, and drops in DSL broadband and television customers.

The firm has upheld its annual guidance for adjusted underlying earnings of €15.2billion to €15.4billion and a minimum of €5.3billion in free cash flow.

Nick Read, its chief executive, said: ‘Our team has delivered another solid quarter, demonstrating the sustainability of our growth strategy and medium-term ambition.’

He added that the group was focused on enhancing its ‘commercial momentum’ in Germany and utilising EU recovery funds, while also boosting returns for shareholders.

Though Vodafone’s share price was up 3.4 per cent by mid-morning on Wednesday, its shares have performed poorly over the last five years as it has suffered from a huge debt pile and poor profitability.

Activist investor Cevian Capital was recently revealed to have built an undisclosed stake in the Berkshire-headquartered corporation.

According to reports in the Financial Times, the Swedish hedge fund has been pressuring the telecoms business to reform its board, more aggressively restructure its portfolio, and consolidate its presence in markets like the UK, Spain and Italy.

Insurer Aviva and education publisher Pearson have also been the subject of campaigns by Cevian, which tends to invest in companies that it believes are undervalued and often pushes for changes at the management level.

Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown, said: ‘Part of the overall problem is that Vodafone is such sprawling business, with tentacles stretching through partnerships and ties ups across Europe to Turkey and Africa.

‘Simplifying the overall structure has been part of the game plan for management, but progress so far has done little to revitalise the share price, which only moved upwards in recent weeks over speculation of fresh deals and the arrival of Cevian Capital to the party.

‘It’s hoped the activist investors will help shove management into some faster moves, but there will still be the same regulatory hurdles to jump through if more targeted M&A activity is on the cards.’