- Accelerated Service Revenue Growth: Q2 service revenue rose 5.8%, driven by Europe and Africa, with ex-Turkey growth at 3%.
- Strong EBITDAaL Performance: H1 EBITDAaL grew 6.8%, with nearly all markets reporting growth, confirming full-year upper guidance.
- Dividend and Shareholder Returns: Returned €5 billion over 18 months and plans €1 billion in buybacks over 6 months, targeting a 2.5% dividend yield growth.
- Germany's 5G Leadership: 5G standalone coverage exceeds 90% of the population, serving 40 million customers with improved satisfaction and churn reduction.
- UK Integration Success: Cost and CapEx synergies on track, with cross-selling benefits and network quality improvements driving better-than-expected Q2 performance.
Operational Highlights
Vodafone's operational performance was strong, driven by growth in consumer and B2B segments. The UK integration is progressing well, with cost and CapEx synergies on track. Germany's turnaround continues, with improving customer satisfaction and churn reduction. The company's Turkish business has seen significant growth, with EBITDA and cash flow increasing by almost EUR 300 million over the last two years. Vodafone's FWA proposition in the UK has shown a net add of 17,000 in the quarter, and the company sees FWA as an opportunity to bridge the time until fiber comes and to cover rural areas.
Growth Prospects
Vodafone's growth prospects are promising, with the company having a strong position in its largest markets, Germany and the U.K. The company's fiber JV, OXG, has made progress, with 350,000 households built and 1 million households opened for sales. Vodafone's B2B business is also expected to drive growth, particularly in digital services, which now account for over 1/4 of its B2B revenues. The recent acquisition of Skaylink is part of Vodafone's strategy to grow its B2B business. As Margherita Della Valle, Vodafone's CEO, notes, the company will prioritize areas with strong demand and good returns.
Valuation
Based on the current valuation metrics, Vodafone's P/E Ratio is -6.69, and the Dividend Yield is 3.68%. The EV/EBITDA ratio is 5.94, indicating a relatively reasonable valuation. With analysts estimating next year's revenue growth at 14.5%, Vodafone's valuation appears to be reasonable, considering its growth prospects. The company's return on investment strategy includes a progressive dividend policy, with a 2.5% dividend yield for the first year, expected to grow annually.
Outlook
Vodafone's focus is on disciplined execution, operational excellence, and customer simplicity to drive growth. The company has completed its major restructuring efforts, including the UK merger, and now aims to make the most of its growth opportunities in Germany, the UK, and Africa. With a strong operational performance and promising growth prospects, Vodafone is well-positioned to deliver long-term value to its shareholders.