Vodafone Earnings Call: Transformation and Challenges

Vodafone Group Plc ((VOD)) has held its Q4 earnings call. Read on for the main highlights of the call.

Vodafone’s recent earnings call highlighted a mixed sentiment, reflecting both achievements and ongoing challenges. The company has made notable strides through transformation and restructuring, leading to robust performances in the U.K. and growth markets such as Africa and Turkey. However, difficulties persist in Germany and the B2B segment, which continue to impact the overall outlook.

Transformation and Restructuring Success

Vodafone has undergone a significant transformation, including the sale of operations in Spain and Italy and a merger with Three U.K. This strategic move has resulted in a more streamlined structure, enhanced customer experience, and a substantial €2 billion return to shareholders through buybacks and dividends.

Strong U.K. Performance

The U.K. segment of Vodafone reported impressive EBITDA growth of 8%, achieving record low customer churn and market-leading Net Promoter Scores in both mobile and fixed broadband services. This performance underscores the effectiveness of Vodafone’s strategies in the region.

Positive Outlook in Africa and Turkey

Vodafone’s operations in Africa and Turkey are positioned strongly, with significant growth opportunities contributing to a notable increase in free cash flow in euros. These regions are pivotal to Vodafone’s overall growth strategy.

Challenges in Germany

Despite successes elsewhere, Vodafone faces a challenging market in Germany. The company is dealing with a declining broadband base, intense competition in mobile, and pricing pressures that are affecting the Average Revenue Per User (ARPU).

B2B Segment Headwinds

The B2B market in the U.K. is experiencing difficulties, particularly with managed services and ARPU pressures, which are impacting growth expectations for the fiscal year 2026.

Fiber Upgrade Delays

The OXG joint venture for fiber upgrades in Germany is behind schedule, affecting Vodafone’s plans to reach 7 million MDU homes. This delay poses a challenge to the company’s infrastructure development goals.

Guidance for FY ’26

Looking ahead, Vodafone has provided detailed guidance for fiscal year 2026. The company expects adjusted EBITDAaL to be between €11 billion and €11.3 billion, with adjusted free cash flow growth accelerating to between €2.6 billion and €2.8 billion. The U.K. merger is expected to contribute significantly to EBITDAaL, although it will initially impact free cash flow due to front-loaded investments. Vodafone remains committed to shareholder returns, evidenced by a new €2 billion buyback program.

In summary, Vodafone’s earnings call reflects a company in transition, with significant achievements in transformation and growth in key markets like the U.K., Africa, and Turkey. However, challenges in Germany and the B2B segment highlight areas needing attention. The forward-looking guidance suggests a positive trajectory, with expectations of continued financial growth and shareholder returns.