Price hikes help Vodafone slow the rot

Vodafone’s first quarter service revenue grew 3.7% organically compared to last year, thanks to improved performances in the UK, Italy and Germany.

Germany attracts close scrutiny, given that it accounts for the biggest single chunk of group sales. Here, service revenue in the three months to 30 June fell 1.3% on last year, but improved sequentially compared to Q4, when it declined by 2.8%. Vodafone attributed the performance to broadband price increases, which came into effect from May, offsetting customer losses.

Vodafone Italy also slowed the rate of decline in service revenue – to 1.6% in Q1 from 2.7% in Q4 – but for different reasons. The improvement in trends was driven by the stabilisation of its mobile prepaid base, and strong growth at its corporate fixed-line operation and new digital services.

Meanwhile, in the UK, Vodafone benefited from both an increase in consumer customers as well as price rises, resulting in service revenue growth of 5.7%.

“In mobile, our [UK] contract customer base declined by 66,000 in Q1 due to the disconnection of zero-value SIMs provided to businesses during the COVID pandemic,” Vodafone explained in its earnings report. “Excluding these, our mobile contract customer base was broadly stable, despite implementing annual contractual price increases. Consumer contract churn remained broadly stable year-on-year.”

On the fixed side, Voda added 42,000 broadband customers, bringing its total customer base up to 1.3 million.

While the numbers themselves aren’t spectacular, the improvement of certain metrics lends Voda an air of stability and positive momentum during a pivotal time for the company.

“As we progress our plans to transform Vodafone, we have achieved a better service revenue performance across almost all of our markets. We have delivered particularly strong trading in our Business segment and returned to service revenue growth in Europe,” noted Vodafone CEO Margherita Della Valle, in a statement. “Looking ahead, we have taken the first steps of our action plan focused on customers, simplicity and growth, but we have much more still to do.”

Indeed, it is still early in Della Valle’s tenure as CEO, and she is at the beginning of a turnaround plan that includes up to 11,000 job cuts and a £15 billion plan to merge its UK operation with rival Three. Investors are looking for signs that management is steering the company in the right direction.

Vodafone’s share price was up by around 4% at the time of writing, which suggests that the market is encouraged by these numbers. They are still down more than 40% from this time last year though, so there is plenty still to do to restore Voda to its former glory.

Helping Della Valle to do just that is a new chief financial officer, Luka Mucic.

Appointed on Monday, he joins from business software giant SAP, where he has worked since 1996, most recently serving as CFO from 2014 until the end of this March. He also simultaneously held the position of chief operating officer between 2014 and 2017.

“I am very excited to be joining Vodafone at this important stage of the group’s development. I look forward to working with Margherita and the team in delivering Vodafone’s strategic priorities of customers, simplicity and growth,” said Mucic, in a separate press release.

“I am thrilled that Luka will be joining the Vodafone team,” added Della Valle. “He has a strong track record of international leadership, corporate repositioning and value-creation. Luka is joining us at a critical time as we undertake the transformation of Vodafone.”

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