Vodafone Sales Hurt by Falling Pound

Equity analysts are pleased to see that Vodafone's second-quarter results are generally stronger than those of the first quarter, despite some weak areas

Allan C. Nichols, CFA 15 November, 2016 | 4:43PM
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Vodafone (VOD) reported fiscal first-half results that continue to be hurt by negative currency moves. The firm’s reported revenue fell 3.9% year over year, versus our full-year projection of a 4.4% gain. However, group service revenue grew 2.3% on an organic basis. We believe this is the more relevant figure, and we don’t expect any significant changes to our fair value estimate. We are pleased to see that the second-quarter results are generally stronger than those of the first quarter, supporting management’s claims that Vodafone is benefiting from “Project Spring”.

While the U.K. is Vodafone’s home market, it accounts for only 13.2% of its revenue

In Europe, organic revenue service grew 0.6% as the firm increased its 4G subscriber base by 61.7% to 39.3 million and its fixed broadband base by 10.2% to 12.9 million. This growth is important, as 4G customers tend to use significantly more data than 3G users. The increase in 4G customers allowed average revenue per user to stabilise, and we expect it to increase over time. For the firm as a whole, 28% of broadband customers are now on converged services, significantly reducing churn and increasing the value of the subscriber.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Vodafone Group PLC109.62 GBP0.00Rating

About Author

Allan C. Nichols, CFA  is a senior stock analyst and international investing specialist with Morningstar.