Vodafone rises to top of FTSE as earnings boosted by German performance
Vodafone (VOD.L) H1 results today saw revenues swelling, boosted by its German segment, where organic service revenue rose 1.2% to €5.8bn.
The telecoms giant also gained off the back of visitors to the UK using its network as international travel reopened.
Revenues from mobile services rose 1.3% thanks to strong growth in its consumer division, offsetting a fall in its business connections services.
Following the UK's exit from the EU, customers also clocked up roaming fees, boosting Vodafone by a small margin.
Between 2017 and the end of 2020, UK consumers were able to use the minutes, texts and data included on their mobile phone tariffs when travelling in the EU.
But since January 2021, UK operators have been allowed to reintroduce roaming charges because the UK left the EU and the Brexit trade deal did not rule them out.
The UK's trade deal with the EU said that both sides would encourage operators to have "transparent and reasonable rates" for roaming.
Before the release, AJ Bell analysts said: "Vodafone’s shares have done virtually nothing in the past 12 months as they are no higher than they were a year ago. In fact, they are trading no higher now than they did in 2002 when the tech, media and telecoms bubble was bursting."
Shares gained 5.2% in early trade in London on Tuesday.
Vodafone said it had seen a recovery in mobile phone sales since the pandemic, with increased customer loyalty across Europe.
It added 149,000 contract customers, and gained momentum in digital sales growth — these now make up around a third of its total business in the UK.
Revenues were up 6% to €3.2bn (£2.7bn) in the half ending in September. It had also benefitted from a favourable exchange rate. The return to growth comes following several difficult quarters.
While there were bright spots, Vodafone's business division was on rocky ground as it pulled out of a large multinational contract and one of its resellers went into administration.
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"Despite the recovery, cash continues to walk out the door and net debt is rising even as the group shrinks, now sitting at around three times full year cash profits," said Nicholas Hyett, equity analyst at Hargreaves Lansdown.
"Exclude the cost of spectrum auctions and things are a little better, but spectrum is a very real cost that telecoms groups have to pay to remain competitive. It’s not going away, and we strongly believe all telecoms groups need to find a way of meeting the cost without simply 'adjusting it out' of the accounts.”
