Telecom giants Vodafone and BT are set to report full year results this week amid a battle to arrest a slide in their share prices over the past year.
Investors will be keen to get an update on Vodafone, one year on since its new chief executive Margherita Della Valle declared that “Vodafone must change,” saying its performance had not been good enough.
The telco veteran has wasted no time carrying out her restructuring, which involved selling off its weaker Italian and Spanish divisions. A proposed merger of its UK business with Three UK is awaiting regulatory approval.
Excluding the two sold-off regions, Vodafone has forecast full year adjusted EBITDAaL of €11bn (£9.5bn), based on the average consensus of 10 analysts.
In what will be Della Valle’s second full year results as chief, Vodafone’s trading will now only include Germany, UK, Turkey, Africa and other European markets. Italy and Spain will report separately from the main group, as discontinued operations, until the deals complete.
“The portfolio reshuffle and its increased focus on better-performing assets look like positive evolutions,” said Matt Britzman, equity analyst at Hargreaves Lansdown. “But, with growth hard to come by, markets will need to see sustained progress before getting too excited.”
A highly competitive market, heavy debts, tight regulation and dividend cuts are to blame for the stock’s poor performance over the past year, falling over 22 per cent. It ranks 92nd within the FTSE 100.
Vodafone recently warned it will halve its dividend in the coming year, due to the smaller operation size, after a previous cut in 2019.
Analysts at AJ Bell said attention will focus on the timing of the sales of the Spanish and Italian businesses.
Investors will also be keen to hear updates on the competition regulator’s probe into Vodafone UK’s proposed merger with Three UK, which is the final peg in Della Valle’s restructuring drive.
“The regulator, thus far, does not seem to welcome the plan,” AJ Bell analysts said.
Rival telco Three UK reported an increase in revenue last week but boss Robert Finnegan said it is “vital” that the telecoms company merges with Vodafone as its current capital expenditure levels are too high.
Last week, the British government conditionally cleared the joint venture under the National Security and Investment Act.
Vodafone’s numbers come ahead of BT reporting its full-year results on Thursday. The multinational telecomms firm reported EBITDA of £7.9bn last year, up five per cent on the previous year, thanks to growth in its Openreach and consumer divisions.
It has provided guidance of revenue and earnings growth, capital expenditure excluding spectrum of around £5bn and free cash flow of between £1bn and £1.2bn.
At its third quarter results in February, BT boss Allison Kirkby said the firm was on track to achieve its financial outlook for the year.
BT’s shares are down over 30 per cent in the past year as the cost of building new fibre and 5G networks has been a drag on the business.
Enders analysts have forecast “muted” financial guidance from BT’s consumer unit and Vodafone UK for 2025 as temporary contract price increases will fail to boost revenues enough to offset the cumulative effects of inflation.
Its business division has also been a problem for the group but a new strategy, put in place by BT Business chief Bas Burger, is an attempt to change this. The company is aiming to switch off the traditional telephone network by 2025 as it shifts to digital and focuses on building 5G networks across the nation.
Burger recently told City A.M.: “We need to rip off the plaster.”