Germany takes the shine off Vodafone's otherwise solid first half

Group revenue edged up to €18.3 billion from €18.0 billion in the same period a year ago, driven by service revenue growth of 1.7% to €15.1 billion.

Africa, Turkey and 'Other Europe' – comprised of Albania, Czech Republic, Greece, Ireland, Portugal and Romania – were the standout performers, offsetting that weaker showing in Germany (see chart below).

Group adjusted EBITDAaL fell very slightly to €5.41 billion from €5.43 billion, driven by a 9.3% drop at Vodafone Germany.

Voda attributed 8.2 percentage points of that decline to Germany's multi-dwelling unit (MDU) TV law. It came into effect in July, and prevents landlords from bundling TV services – and their associated costs – within rental agreements. The result is Voda's MDU TV customer base has more than halved to 4 million from 8.5 million.

Germany is comfortably Voda's single biggest market, accounting for 36% of group service revenue and 42% of adjusted EBITDAaL, so when things go south there, it tends to drag the rest of the group down with it.

It's a shame because Voda is slowly turning its fortunes around under the stewardship of CEO Margherita Della Valle, whose strategy is centred around improving customer service; cutting costs and exiting poor-performing markets; and growing service revenue – with a particular emphasis on B2B.

In a strategy update, Voda said net-promoter scores (NPS) are improving across its footprint. Detractors are on the decline in all customer-facing segments, and it boasts either a leading or co-leading NPS in nine out of 15 markets.

It has completed the sale of Vodafone Spain, and it has received the EU's blessing for the sale of Vodafone Italy to Swisscom. It is also seemingly on the cusp of getting the green light to merge its UK operation with Three.

It has also sold a further 10% stake in Vantage Towers for €1.3 billion, and sold 18% of Indus Towers for €1.7 billion, using the proceeds of the latter to pay off debts in India.

On the growth front, in addition to growing revenues, Voda's return on capital expenditure (ROCE) improved to 7.2% from 6.4%. It also recently agreed in principle to acquire Telekom Romania Mobile in partnership with Digi Romania.

"We continue to make good progress on our strategy to change Vodafone," said Della Valle. "The approval processes for our transactions in the UK and Italy are nearing conclusion. These will complete our programme to reshape the group for growth. We are also investing in Germany to strengthen our market position and taking steps to expand our B2B capabilities."

Della Valle's turnaround plan is far from complete, but after many years of stagnation, Vodafone appears to be heading in the right direction.