Germany suffered a sizeable EBITDA decline in the 2H of FY25, and guidance for European EBITDA next year implies another tough year in FY26 with an underlying 5% decline for Europe as a whole excluding 1&1.

Elsewhere, the UK had a very solid FY25 and is a good news story for the Group with the merger with Three in prospect, but the Rest of World’s contribution is likely to diminish from here.

Various one-offs will support the outlook for next year, but operational execution is at the core of Vodafone’s raison d’être. Beyond some encouraging KPIs, investors continue to await meaningful evidence of such.

The slowdown in telecoms traffic volume growth post-pandemic has persisted for far longer than a simple hangover effect would imply, and has spread from fixed broadband to mobile in many markets

The eventual emergence of the metaverse and/or AI-generated traffic may mitigate this trend, but it is hard to see growth ever returning to a sustained 30%+ per annum level, with around 10-15% likely to prove the new normal

While far from disastrous for telcos, it does have important implications, such as the need to structure pricing more carefully, focus on network quality over capacity, and be more wary of the threat (or opportunity) from MVNOs, FWA and satellite

Geopolitical clashes between the US and Europe were a barely concealed undercurrent at this year’s MWC, with European tech regulation at odds with US moves, and telcos pitching for regulatory favours on firmer ground than they have had for years.

Perhaps the largest impact is on the satellite industry, with Eutelsat OneWeb having been given a new lease of life as the EU champion versus a now disfavoured SpaceX/Starlink.

AI was of course the talk of the town, but largely in ways that are tangential at best to traditional telcos, with the necessary building blocks for telcos to play a big role (i.e. network APIs) still needing much work.

Vodafone has signalled a tougher outlook in Germany primarily due to a worsening competitive backdrop for mobile.

Although Vodafone has reiterated its guidance for the full year, this now relies heavily on developing countries, with currency risk emerging for FY26.

Investors are likely to be sceptical of the company’s “ambition” to grow in Germany next year, with this seemingly predicated on an improving competitive environment. Nonetheless, the company can point to some early fruits of its turnaround endeavours there, and next year’s trends should be better than the current ones regardless.

Vodafone’s Q2 performance was in line with the company’s guidance on almost every metric and was always going to be a tough one given the hit from TV losses in Germany and the annualisation of price increases there

The share price reaction (-6%) is likely a reflection of fears around Vodafone’s ability to improve underlying operational performance in Germany. Whilst this remains a valid concern, there is nothing in these results to amplify our worries on the issue

Escalating competitive pressure in German mobile is, however, a threat to the company’s growth outlook, and Vodafone’s promise to be “disciplined” in its approach to it may turn out to be too conservative a strategy

Q1 was always going to be tough for Vodafone with lower in-contract price increases a very significant drag on performance (across the sector), TV losses in Germany ramping up, and ongoing struggles to turn around broadband performance there. A deterioration in German mobile is an unwelcome addition.

Encouragingly, Vodafone continues to optimise its portfolio and is guiding to a U-shaped recovery, with Q2 particularly weak and B2B driving a better 2H.

While there are particular headwinds this year and tailwinds next which point to an improving outlook, better operational performance remains critical to the company's future, and we continue to await evidence of this.

On 4 June 2024, Enders Analysis co-hosted the annual Media and Telecoms 2024 & Beyond Conference with Deloitte, sponsored by Barclays, Financial Times, Salesforce and Adobe. 

With over 580 attendees and over 40 speakers from the TMT sector, including leading executives, policy leaders, and industry experts, the conference focused on how new technologies, regulation and infrastructure will impact the future of the industry. 

This is the edited transcript of Session Three, covering: consolidation in the telecoms sector; fixed-mobile convergence; and the future of the fibre industry. Videos of the presentations are available on the conference website.

Vodafone has finalised its deal to sell its Italian business to Swisscom for €8bn, opting for greater regulatory certainty and higher upfront proceeds rather than a potentially higher offer from Iliad for an Italian JV.

The company has grasped the nettle on the trailed dividend cut, bringing the announcement forward from the expected May timing, and halving the payout.

The company is highlighting how well it is positioned to grow now without Italy and Spain, and with the prospect of a better position in the UK. Germany will be more important than ever in this growth equation.

Vodafone has confirmed that it is in discussions to sell its Italian business to Swisscom for €8bn having rebuffed a higher offer from Iliad for an Italian JV in December.

The Spanish and Italian deals should be reassuring to investors, are helpful to the growth profile of the company, and may help to reduce any conglomerate discount in the share price.

The all-important free cashflow impact of the deals remains to be seen with potential for buybacks of up to €10bn compensating for the direct dilution of the deals and softening the blow of any dividend downgrade in May.

Iliad has made an attractive offer for Vodafone Italy, to initially form a joint venture but to ultimately give Iliad the right to buy Vodafone's stake.

Vodafone management may be more keen on a less transformative, but easier, deal with Fastweb, retaining Vodafone's presence in Italy.

Iliad's announcement is likely aimed at highlighting to shareholders and the Vodafone board that a more value-creative deal is on the table, even if management appetite is not there for it just yet.