May 12, 2020

Vodafone sees earnings boost but pandemic hits roaming revenue

By Tech Online Things

Vodafone has scrapped its outlook for 2021 due to the coronavirus outbreak but will still dish out a dividend to investors and continue its existing strategy.

Revenues for the year rose by 3 per cent to €45 billion with an improved performance in Europe – boosted by the contribution of the cable assets acquired from Liberty Global – while EBITDA rose 2.6 per cent to €14.9 billion.

In the UK, total revenues rose slightly to €6.5 billion, boosted by a 0.5 per cent increase in service revenues, while losses narrowed.

Vodafone results

Across Europe, the company has made progress in its infrastructure rollouts over the past 12 months. So far, Vodafone has launched 5G services in 97 cities across eight countries, while its ‘Next Generation Network’ now covers 136 million premises across Europe. By 2023, it hopes to have 50 million customers connected to gigabit speeds.

On top of this it is pressing ahead with plans to achieve €1.2 billion savings through efficiency measures, such as common group functions and digital initiatives. To date, it has achieved €800 million and has completed the separation of its tower infrastructure into a separate entity with a view to an IPO in 2021.

The company’s decision to maintain its dividend will come as a boost given the decision by rivals to suspend theirs due to the uncertainty caused by the ongoing pandemic.

“Vodafone has delivered a good financial performance – growing revenue, adjusted EBITDA and free cash flow – whilst building strong commercial momentum through the year and executing at pace on our strategic priorities,” declared Vodafone Group CEO Nick Read.

Vodafone said its priority had been to maintain service quality and support business and consumer customers during the crisis, citing network initiatives, charitable donations, and support given to government responses.

“The services Vodafone provides are more important than ever and we are committed to playing a key role in society’s recovery to the ‘new normal’,” continued Read. “I am pleased with the rapid, comprehensive and coordinated way we responded to the COVID-19 crisis.

Like other telecoms groups, Vodafone has seen mobile and fixed line data consumption increase significantly as customers increasingly rely on their connection for work, entertainment and communication with friends and family during lockdown.

However this increase has been difficult to monetise in the short-term while other revenues have declined. With this in mind, the company is not offering earnings guidance for 2021.

“The economic impact of the pandemic in our markets, whilst uncertain, is likely to be significant,” Vodafone told investors.

“Whilst our business model is more resilient than many others, we are not immune to the challenges. We are experiencing a direct impact on our roaming revenues from lower international travel and we also expect economic pressures to impact our customer revenues over time. However, we are also seeing significant increases in data volumes and further improvements in loyalty, as our customers place greater value on the quality, speed and reliability of our networks.”