Vodafone shares sink after profits and revenue fall

Covid lockdowns proved bad news for phone firm as less mobile people translated into lower roaming charges

Last modified on Tue 18 May 2021 09.43 EDT

Shares in Vodafone slumped by as much as 7% as investors reacted to lower than expected profits, a decline inrevenues due to the impact of pandemic travel bans and a drop in smartphone sales. The news made the mobile company the biggest faller on the FTSE 100.

While Vodafone swung back to the black last year, reporting profits of €536m (£461m) compared with a loss of €455m in 2019, the result was at the lowest end of the company’s guidance and disappointed City expectations.

The mobile operator reported a fall in total group annual revenues of 2.6% to €43.8bn blaming factors including a drop in roaming revenue – the charges some customers pay when using their phones abroad – as pandemic restrictions halted most travel and tourism.

“People being less ‘mobile’ in general is bad news for mobile telecoms groups like Vodafone,” said Russ Mould, investment director at AJ Bell. “Vodafone saw its revenue and earnings hit by lower roaming charges as individuals were unable to travel thanks to the pandemic. Handset sales have also slumped, suggesting we’re not so bothered about having the latest, fancy new phone when we’re stuck at home.”

The company’s biggest market, Germany, which accounts for 31% of total revenues, performed strongly, growing total revenues by 7.5% to €13bn last year. In the UK, which accounts for 13% of Vodafone’s business, revenues fell 5% to €6.1bn.

Vodafone’s European mobile customer base grew by 2% to 65.4m, with the rate of customers leaving the company falling from 14.6% to 13.7%, as broadband customer numbers rose from 25m to 25.6m.

Investors were also unhappy at an increase in annual capital expenditure, up from €7.85m to €8bn, which will hit its free cash flow. Nick Read, Vodafone chief executive, said the investment in 5G and broadband infrastructure would pay off over the longer term.

“The world has changed,” said Read. “The pandemic has shown how critical connectivity and digital services are to society. Vodafone is strongly positioned and through increased investment, we are taking action now to ensure we play a leadership role and capture the opportunities that these changes create.”

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