Numbers show ongoing weak performance in key German broadband market and rumours of merger with or acquisiton by MasMovil persist
Vodafone Group gave its quarterly update for the period to the end of December against a backdrop of activist investors demanding better performance. It had a 4% rise in revenue during the quarter to the end of December, with income from customers growing 2.7% to €9.6 billion.
It has also said it expects to meet it full-year targets. Service revenue growth was mostly attributable to Spain, Turkey and Egypt.
In its most important market, Germany, Jefferies highlighted Vodafone’s better mobile performance, mainly due to rising ARPU and stronger demand for B2B services, but stressed the “further weakening” of fixed broadband intake.
Overall, Germany posted revenue growth of just 1.1%, citing the pandemic and changes to law as factors – cable services are no longer bundled into the rent of housing association tenants.
Activist investor Cevian Capital argues Vodafone paid too much for the Liberty Global cable assets in 2019.
Possible M&As
Over the last year, Vodafone Group’s CEO, Nick Read, has talked about and is or has explored consolidation in its weaker markets like Spain, Italy and the UK.
Spanish newspaper El Confidencial this morning ran a report that Spanish operator MasMovil wants to buy Vodafone Spain, citing undisclosed sources. The article said the price tag was put at €7 billion.
Rumours of a merger between the two have been circulating since last October, although the valuation has varied somewhat.
Vodafone is also looking to merge its UK and Italian operations.
Tower activities
One of the areas where investors want action is Vantage Towers in which Vodafone is the majority shareholder, and that had its IPO last spring.
Tenancy levels are up from an average of 1.39 at the end of 2020 to 1.43 now. This was a major contributor to revenues for the nine months of the financial year, to the end of December 2021, rising 3.1% compared with a year earlier to €746 million.
Q3 also saw Germany’s 1&1 sign a major contract with Vantage to use its towers and associated services. 1&1 is building an Open RAN 5G network and piggybacking on Telefonica Germany’s infrastructure during the build.
However, Vantage ended the quarter with the same number of macro sites. In a statement the company said that the “increase in new built sites (BTS) was offset by the previously communicated decommissioning of sites, in particular driven by our active sharing agreement in Spain and other European markets, creating efficiencies in our network.
“Whilst the BTS programme accelerated in Q3, the macro site build year-to-date has been challenged mainly by supply chain issues. We expect these challenges to persist beyond Q4 FY22 into FY23 and will require continued management,” the company said in a statement.
Hence Vantage owns 45,700 towers outright and jointly own sites in the UK and Italy.
Equity research house Jefferies commented, “VT delivers on promised acceleration of revenue growth and tenancy adds in-line with expectations” but expresses some concern about whether the slower build of new sites will dilute “revenue upside from the 1&1 contract award”.
The group is exploring merger options for Vantage Towers, including with Orange or Deutsche Telekom.