Business segment boon for Vodafone in first quarter

As it works out how to merge business with erstwhile rival, UK operator posts first-quarter results showing green shoots of recovery, after fiscal 2023 leading to turnaround strategy based on customers, simplicity and growth

Just weeks after it confirmed it was working with Three UK to combine businesses and compete more effectively in the UK comms market, and following financial results said to reflect performance that had “not been good enough”, Vodafone has announced a first quarter of 2024 which the operator said shows the first steps in its recovery action plan, achieving a better-than-expected service revenue performance across almost all of its markets, with particularly strong trading in its business segment and a return to service revenue growth in Europe.

For the quarter ended 30 June 2023, Vodafone reported overall service revenue of €9.11bn, representing a fall of 4.2% compared with the same time a year ago. Of the total, Germany contributed €2.819bn of service revenue, and €328m of other revenue, the total 1.3% lower on an annual basis. The next-largest contributing market was the UK, which delivered service revenue of €1.401bn out of a grand total of €1.684bn, up 5.7% annually.

Drilling deeper into the German performance, Vodafone said the results primarily reflected the cumulative impact of customer losses over the past 18 months, partially offset by higher broadband ARPU.

The improvement in quarterly trends is said to include the initial benefit of broadband price increases, which started to take effect from May 2023. Fixed service revenue declined by 0.9%, an improvement on the previous quarter, where it was down 2.1%. This was driven by a lower broadband and TV customer base, but partially offset by higher broadband ARPU.

“During Q1, Vodafone Germany began the phased implementation of a broadband price increase across our customer base,” it said. “This supported service revenues but impacted our commercial performance, as expected, with net cable customer disconnections of 70,000 and 51,000 DSL losses.”

The company added that the performance of its German gigabit fixed network has continued to improve, with strong results in three independent network tests.

Mobile service revenue in Germany declined by 1.9% on an annual basis, driven by a lower mobile customer base and ARPU, as well as mobile termination rate cuts. The improvement in quarterly trends primarily reflected a tough prior-year comparison in Q4 FY23.

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UK service revenue increased mainly due to strong growth in the consumer segment, supported by annual price increases and a higher customer base, as well as continued good growth in the business sector, partly offset by lower wholesale revenue. Contractual price increases took effect from April 2023, driving an improvement in quarterly trends.

In mobile, Vodafone’s contract customer base declined by 66,000 in Q1 due to the disconnection of zero-value SIMs provided to businesses during the pandemic. Excluding these, the UK mobile contract customer base was said to be broadly stable, despite implementing annual contractual price increases.

Consumer contract churn remained broadly stable year-on-year, while in Vodafone fixed broadband it added 42,000 broadband customers in Q1, to give a total of 1.3 million customers. Through partnerships with CityFibre and Openreach it can now reach more than 12 million households with full-fibre broadband, a figure said to be more than any other provider in the UK.

Commenting on the results, Vodafone Group chief executive Margherita Della Valle said: “As we progress our plans to transform Vodafone, we have achieved a better service revenue performance across almost all of our markets. We have delivered particularly strong trading in our Business segment and returned to service revenue growth in Europe. Looking ahead, we have taken the first steps of our action plan focused on customers, simplicity and growth, but we have much more still to do.”

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