Despite facing customer losses in the German market, Vodafone Group (VOD, Financial) has maintained its full-year performance outlook. The UK-based mobile operator reported a 1.7% growth in service revenue for the first half, reaching 15.1 billion euros, aligning with market expectations. Although Vodafone experienced a 6.2% decline in its second-quarter performance in Germany, this setback was offset by growth in other European markets, Turkey, and Africa.
In its efforts to improve financial health, Vodafone is focusing on divesting loss-making operations and pursuing mergers. The company aims to expand its business in the UK market. Vodafone's core earnings rose by 3.8%, reaching 5.4 billion euros, meeting market forecasts.
However, the German market posed challenges primarily due to legal changes that ended bulk TV sales to apartment buildings, leading to a 6.2% decline in service revenue, an increase from the 1.5% decline in the first quarter. Earlier this year, the German government banned housing associations from bundling TV services with rent, impacting Vodafone's previous quarter performance. The company had warned it might lose half of the contracts with 8.5 million households.
CEO Margherita Della Valle is implementing a revitalization plan, which includes selling non-profitable businesses in Italy and Spain and merging with CK Hutchison Holdings Ltd's UK Three company. The merger, expected to receive regulatory approval soon, aims to create the UK's largest revenue-generating mobile operator.
Della Valle noted that despite slowed growth in Germany, she is investing there to strengthen Vodafone's market position and expand its business-to-business capabilities. She expressed confidence that the measures will drive Vodafone's growth this year and accelerate it in the fiscal year 2026.
Nonetheless, Vodafone reiterated its full-year targets of approximately 11 billion euros in core profit and at least 2.4 billion euros in adjusted free cash flow.
