Vodafone turnaround: $11.9 billion earnings and a return to progress in Germany, however ‘way more nonetheless must be finished’

Service revenue for the year in Germany was up 0.2% to €11.45 billion ($12.4 billion), the company said in a statement on Tuesday. Adjusted earnings before interest, tax, depreciation and amortization after leases fell 5.8% to €5 billion for the market, which the company attributed to energy and other inflationary costs.

Vodafone’s growth in Germany has been hit by an upcoming legal change that prevents housing associations from bundling TV with rental costs. The company expects to retain only half of the 8.5 million households on these types of contracts after the law goes into effect in July.

“Much more still needs to be done in the year ahead,” Della Valle said in the statement, adding that the company planned to “simplify our operations throughout the group.”

Vodafone is increasing its focus on the German market and exiting unprofitable ones, as part of Della Valle’s turnaround strategy. The CEO said in February that the company expected an “acceleration of our underlying growth rates” in Germany in 2024.

In results that excluded Vodafone’s Spanish and Italian operations, which are being sold off, the company reported a 6.3% increase in overall organic service revenue growth to €29.9 billion for the year. Adjusted earnings before interest, tax, depreciation and amortization after leases were €11 billion, in line with company-compiled analyst estimates.

The company forecast adjusted earnings before interest, tax, depreciation and amortization after leases of about €11 billion for fiscal 2025.

“Vodafone’s exit from struggling operations Italy and Spain puts the group on a healthier footing,” said Bloomberg Intelligence analyst Erhan Gurses. “But there are reasons to remain cautious, we think, as Vodafone faces cable TV regulation headwinds this year in Germany while management’s past missteps and the sale of operations at relatively low valuation bring some questions around the ability to boost shareholder value.”

The company is selling its Italian division to Swisscom AG’s Fastweb SpA, while Spain is expected to sign off soon on the sale of its Spanish unit to Zegona Communications Plc, Bloomberg News reported earlier. The company’s proposed merger with CK Hutchison Holdings Ltd.’s Three in the UK has been cleared on national security grounds but is undergoing scrutiny from the country’s competition regulator.

Vodafone’s shares were up 2.77% to 71.94 pence at 8:24 a.m. in London on Tuesday.