FTSE 100 telecoms giant Vodafone reported an acceleration in service revenue growth in the UK, driven by improvements for customers and in anticipation of its merger with Three UK.
The firm told the markets this morning that UK group service revenue saw an uptick of 3.3 per cent in its third quarter to €1.9bn (£1.58bn), up from 1.2 per cent the previous quarter.
Its total revenue increased by 7.2 per cent, bringing UK revenue to €1.9bn (£1.58bn).
This was fuelled by customer experience improvements, compared to other markets like Germany, which saw a 6.4 er cent decline due to regulatory changes.
Mobile service revenue grew by six per cent to €1.25bn, with organic growth at 1.8 per cent. This was driven by an expanding consumer customer base and the achievement of its key project milestones.
The FTSE 100 firm posted an increase in adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of 2.2 per cent to €2.8bn in this quarter.
This was due to strong service revenue growth and lower energy costs throughout Europe, despite being partially offset by challenges in Germany.
Vodafone reiterated its guidance for full year adjusted EBITDA of approximately €11bn and an adjusted free cash flow of at least €2.4bn.
Margherita Della Vale, the telecom giant’s chief executive, said: “With service revenue growth accelerating to 5.2 per cent, we are making good progress in our transformation”.
Vodafone’s UK merger
“The approval of the UK merger” she said, marked “a significant reshaping of our portfolio”, Della Vale added.
In December 2024, the UK’s competition and markets (CMA) approved the merger of Vodafone UK and Three UK.
The transaction, which is now expected in the next few months, will create the UK’s largest mobile operator.
Vodafone will hold 51 per cent of the stake, with CK Hutchison, Three UK’s parent company, owning the other 49 per cent.
Ahead of today’s results, Albie Amankona, analyst at Third Bridge, commented:
“The Vodafone-three merger unlocks significant cost efficiencies trough network integration. By consolidating infrastructure, the new entity can reduce maintenance expenses and strengthen its competitive position against BT-EE and Virgin Media 02.”
However, she said, “Vodafone’s lack of exclusive content remains a weakness, as rivals continue to leverage propriety entertainment services to drive customer retention”.
Despit its strategic moves, the firm remains under pressure in an increasingly competitive market.
Its share price has struggled over the past decade, and while progress is evident, analysts remain divided on its long term outlook.
Vodafone’s share price plummeted 54.76 per cent in the last five years, but has been relatively stable in the last 12 months, up 4.39 per cent.
Richard Hunter, head of markets at Interactive Investor, added: “Vodafone’s transformation is well underway, but turning around a business of this scale takes time.”
He said: “The market remains cautious, with share price movements reflecting ongoing uncertainty. While there are signs of progress, the group still faces challenges in providing that its turnaround strategy will deliver sustained growth”.