Vodafone numbers paint a picture of mediocrity

Vodafone has continued its slow decline after reporting its latest quarterly results, but no-one seems to be that surprised.

Jamie Davies

July 21, 2017

3 Min Read
Vodafone HQ sign

Vodafone has continued its slow decline after reporting its latest quarterly results, but no-one seems to be that surprised.

It would hardly be considered a rip-roaring quarter if you have met analyst expectations of burning revenue, but the sceptical view on Vodafone is also shared by the investor community as well. Share price has actually increased slightly (at the time of writing), perhaps signalling that nothing more than mediocrity is expected from the group. The decline has slowed, and there are shoots of positivity, but it’s difficult to find too much to shout about here.

In terms of revenues, Europe dipped once again, this time 4.8% in the negative, with Africa, Middle East & Asia Pacific bringing in some marginal growth, 1.2%. This small success story could not save the top-line as Group revenues declined by a total of 3.3% to £11.474 billion. The UK and India are the main trouble makers here, with each market declining year-on-year by 4.5% and 8.7% respectively.

It doesn’t make the best reading, but perhaps someone should tell the management team, they appear to be looking at different numbers to us. “We have made a good start to the year in Europe, where our commercial momentum remains robust, and growth accelerated across AMAP,” said CEO Vittorio Colao.

“Our substantial investments in network leadership, an excellent customer experience and even greater ‘more-for-more’ propositions for customers are enabling us to monetise strong demand for mobile data. We are gaining profitable market share in broadband, and a growing proportion of our customers now take our fully converged offers.”

On the broadband side of things, there does seem to be some momentum heading in the right direction, though it’s hardly earth shattering. The team claims to be able to offer broadband 98 million households across Europe, an increase of 24 million which is nothing to turn your nose up at, though currently Vodafone only counts 15 million broadband customers across the group.

It’s an area which is of strategic importance to the business due to the customer ‘stickiness’ benefits. For converged products, the team believes churn rates are roughly half the level of households who take a single product. Numbers aren’t mind blowing for the moment, there are currently 3.8 million converged households in Europe, but it added 700,000 over the course of the quarter. Not too bad.

But it is the UK which is causing a lot of the issues here. It’s the second largest market for the company in Europe, but also one of the fastest decliners.

“The UK business remains in the doldrums, but some encouraging signs are emerging of a long-awaited turnaround,” said Kester Mann of CCS Insight. “Notably, contract churn fell for a second consecutive quarter, while Net Promotor Score (NPS) continues to rebound. The operator will point to strong recent investment in network and customer service as drivers of recovery, but it still has plenty to do to regain standing in one of Europe’s most competitive markets.”

The latest strategy to turn around the UK has been focused on improving customer services, an area both Vodafone and the wider industry are notoriously bad at, though the messaging and chatbot services do sound pretty good. The plan is to roll the initiatives out to the rest of the markets, though whether being nicer to customers has any notable impact on the financial performance of the company remains to be seen.

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