Vodafone shares slump as it ups cost savings and slashes earnings
Vodafone shares are on track to hit their lowest point since 1997 this afternoon, paving the way for things to go from bad to worse for the FTSE 100 firm.
Not only did the telecoms giant slash its forecasts for the coming year, but it also announced a new cost savings target of over €1bn (£877m), aimed at “streamlining and further simplifying the Group” over the next three years.
Chief executive Nick Read told reporters that this move would inevitably lead to job cuts, but refused to elaborate on the scale nor where these culls would be made.
Vodafone had already signalled a desperate grab for cash, selling a hefty stake in its phone mast business last week to KKR and Global Infrastructure Partners in a deal valuing the firm €16.2bn (£14.3bn).
Read said the deal was a “landmark moment,” allowing his firm to retain co-control and dump Frankfurt-listed Vantage Towers off its balance sheet, thereby reducing Vodafone’s debt.
Although revenue did climb a humble two per cent to €22.9bn for the telecoms group in the half year results, investors’ eyes were firmly on the company’s weak performance in Germany, its biggest market.
Vodafone has been struggling with broadband and TV losses following domestic regulatory changes, and the group confirmed that its expected earnings were likely to land at the bottom end of its expected range, battered by inflation and the growing threat of recession.
“Germany is definitely the big focus. If Germany sneezes, the Vodafone Group gets a cold, and Germany is definitely under the weather right now,” telecoms expert at Enders Analysis Karen Egan told CityAM, explaining that it accounts for more than a third of Group EBITDAaL.
She predicted that the German decline is only going to get worse as we head into the second half of the year, cementing the fact that the once “ growth engine of the company continues to go into decline”.
Instead, it seems that Vodafone is now pinning its hopes on a potential tie-up with Three, which Read continued to back as a way to scale both businesses to keep up with the big dogs like BT and Sky.
Fellow telcos giant BT also introduced a similar cost-cutting policy in its recent quarterly results.