Britain’s multinational telecommunications company Vodafone Group plc (GB:VOD) is making headlines this morning after releasing its third quarter Fiscal 2024 trading update. Vodafone’s Q3 FY24 results showed resilience, thanks to solid momentum in Europe and Africa. VOD shares were flat as of writing.
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Details of Vodafone’s Q3 FY24 Results
For the three months ending December 31, 2023, Vodafone’s total revenue witnessed a 4.2% year-over-year organic growth but was down 1.4% on a reported basis to €11.37 billion. The strong organic revenue growth was fueled by a 4.7% rise in the revenue of the Service segment, the company’s major top-line contributor. Vodafone noted that 14 of its 17 markets showed service revenue growth in Q3 FY24. Talking about the German operations, its biggest market, Vodafone said that the underlying commercial performance was catching up and customer growth in mobile was good.
Importantly, Vodafone reiterated its Fiscal 2024 guidance, backed by the solid third-quarter results. For FY24, Vodafone expects adjusted EBITDAaL (earnings before interest, tax, depreciation, and amortization after leases) to reach €13.3 billion and adjusted free cash flow of €3.3 billion.
Vodafone’s Fixed service revenue grew marginally as the company increased its prices, leading to customer disconnections. Also, Mobile service revenue fell marginally owing to a lower customer base and a decline in mobile termination rates. Moreover, Vodafone’s Business Service revenue fell 1.9% year-over-year due to lower revenues from the public sector, cloud services, and IoT (Internet of Things) segments.
Vodafone’s Strategic Business Overhaul
Vodafone is steadily moving towards discarding its non-core units and streamlining its operations through various initiatives, including job cuts. Accordingly, Vodafone signed a deal with Zegona Communications plc (GB:ZEG) last year to sell 100% of its Spanish operations. The sale is expected to be completed in the first half of this year. Vodafone will receive €4.1 billion in cash and up to €0.9 billion in the form of redeemable preference shares with a lock-in period of six years.
Furthermore, Vodafone is seeking a suitable partner or buyer for its Vodafone Italy unit. Recently, the company dismissed a bid from France-based telecom firm Iliad SA to unite their Italian operations.
On a brighter note, Vodafone struck a 10-year strategic partnership with American tech giant Microsoft (NASDAQ:MSFT). The deal includes bringing artificial intelligence (AI), digital solutions, enterprise, and cloud services to over 300 million businesses and consumers across Europe and Africa.
Is Vodafone a Buy, Sell, or Hold?
On TipRanks, VOD stock has a Hold consensus rating based on four Buys, four Holds, and two Sell ratings. The Vodafone plc share price target of 95.60p implies 41% upside potential from current levels.
