Interactive Investor

ii view: Vodafone steers full-year estimates higher

Over 180 million African mobile customers and a dividend yield of more than 6%. Buy, sell or hold?

16th November 2021 11:04

Keith Bowman from interactive investor

Over 180 million African mobile customers and a dividend yield of more than 6%. Buy, sell or hold?

First-half results to 30 September

  • Service revenue up 2.8% to €19 billion
  • Adjusted earnings (EBITDA) up 6.5% to €7.56 billion
  • Interim dividend unchanged at 4.5 eurocents per share
  • Group net debt up 0.9% at €44.3 billion

Chief executive Nick Read said:

"The results show we have demonstrated good sustainable growth and solid commercial momentum. Our strengthened performance in Africa and Europe puts us on track to be at the top end of our guidance for this year, as well as firmly within our medium-term financial ambitions.

“We know there is more to do and our focus remains on driving growth. We are structured for value creation, with operational priorities and portfolio actions which are designed to improve returns at pace."

ii round-up:

Telecoms giant Vodafone (LSE:VOD) today reported rises in both service revenue and adjusted earnings as it continued to emerge from the global pandemic.

Service revenue for the second quarter grew by 2.4% compared to analyst expectations nearer to 2%, with a gradual recovery in roaming and visitor revenue aiding its profit margin and helping adjusted earnings (EBITDA) or profit to grow 6.5% to €7.56 billion in the half year to 30 September. 

As a result, management narrowed its full-year earnings guidance to between €15.2 billion and €15.4 billion from a previous €15 billion to €15.4 billion.

Vodafone shares rose by more than 6% in UK trading, having declined by around 7% year-to-date coming into the numbers. Shares for rival BT Group (LSE:BT.A) are up by almost 25% in that time, while the broader FTSE 100 index has gained by around 14%. 

Vodafone also increased its free cash flow target to at least €5.3 billion from at least €5.2 billion.

The European and African telecoms company operates mobile and fixed networks in 21 countries and partners with mobile networks in 51 more. 

Performance at its two core Northern European markets - Germany and the UK - continued to hold firm, although in Southern Europe it remains extremely competitive in Italy and Spain.

A 5% increase year-over-year in total first half revenue to €22.49 billion was aided by a recovery in handset sales following pandemic disruption in 2020.

The interim dividend remained unchanged at 4.5 eurocents per share. 

ii view:

Vodafone has around 66 million European mobile contract customers and around 186 million African mobile customers. Its African data users number almost 88 million, while its European TV customers total over 22 million. 

In recent years, Vodafone has been pursuing renewed strategic priorities. It has simplified its operations down to Europe and Africa, separated out and listed its Vantage Towers business to help reduce debt, and continued the roll out of its next generation mobile and fixed networks. The change of direction also involved a previous reduction or rebasing of its dividend payment to give increased financial flexibility. Its near-term priorities include strengthening its commercial momentum in Germany and accelerating operational transformation in Spain.

For investors, room for improvement at its Southern European markets remains. Capital expenditure requirements are ongoing due to the roll-out of 5G networks, while the pandemic caused lower roaming revenue due to travel restrictions.  

On the upside, we could see further strategic business moves like separating out its African payments business. Management continues to show its willingness to readjust its business portfolio, and trends such as remote working and increased adoption of cloud technology all still favour the telecoms giant. In all, and with the shares sat on a dividend yield of over 6%, income investors are likely to stay onboard for the longer term. 


  • Attractive dividend payment (not guaranteed)
  • Ongoing willingness to adjust business portfolio


  • Pandemic has impacted
  • Competitive markets

The average rating of stock market analysts:

Strong buy

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