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Tuesday 14 May 2019

Vodafone cuts investor dividends on €7.6bn loss

Vodafone cuts investor dividends on €7.6bn lossThe value of Vodafone’s share price tumbled as the mobile operator cut its annual dividends for investors by 40% to help reduce €27bn of net debt after disappointing FY19 financial results.

Group revenue declined 6% to €43.7bn, with operating loss expanding to an eye watering €7.6bn compared to a net profit of €2.8bn in the previous financial year. The steep fall was largely due to costs associated with Vodafone India’s merger with Idea Cellular and changes from IAS18 to IFRS15 accounting standards.

5G spectrum auctions in Europe and difficult trading conditions also took their toll as Vodafone saw its global organic service revenue flatline at €39.2bn (down 5% in the UK). Fixed service turnover rose 3.8% due to growth in fixed, security and cloud services (up 5.3% in the UK due to the strong performance of consumer broadband and the business division). Mobile declined 1.3%, while 10% revenue growth in Internet of Things (IoT) was offset by significant declines in average revenue per user (ARPU).

The operator is undergoing some major restructuring in anticipation of the EU approving its €18bn Liberty Global cable broadband acquisition, which includes a proposed €2.1bn sales of its New Zealand arm after previously offloading its cloud services business to IBM in an eight-year managed services agreement.

We also note what looks like a renewed focus on core telecommunications connectivity, with network sharing agreements and greater automation within its infrastructure and customer service processes expected to underpin a simpler, more profitable operating model (net operating expenses are expected to fall by €400m in Europe alone during FY20).

Much now appears to rest on Vodafone’s imminent launch of commercial 5th generation (5G) mobile networks in the UK and Europe (see 5G: Opportunities in Next Generation Mobile Networks), closely allied to the growth of its IoT business (see Vodafone shines spotlight on IoT).

At such an early stage of the game it’s impossible to tell if 5G revenue will reap the expected rewards any time soon, but the short-term pain of cutting the investor dividend at least leaves Vodafone better placed to finance further spectrum purchases and network infrastructure rollouts in the near future.

Posted by Martin Courtney at '10:15' - Tagged: results   mobile   iot   Vodafone   5G   telecommunications  

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