Vodafone targets deals as it warns on inflation hit

Vodafone said it is targeting deals in the European telecoms market as the FTSE 100 group warned that inflation would be a drag on its performance this year.

The mobile operator has been under pressure from shareholders to ditch weaker businesses and bulk up in European markets where it faces fierce competition.

The group’s pledge on Tuesday came alongside results that showed both revenues and profits crept higher in the 12 months to the end of March. Revenues rose 4 per cent to €45.6bn, just exceeding analysts’ expectations, while a 5 per cent increase in core earnings to €15.2bn matched forecasts.

“We are focused on improving the commercial performance in Germany, actively pursuing opportunities with Vantage Towers and strengthening our market positions in Europe,” chief executive Nick Read said in a statement.

Read’s strategy for the group has been under sharper scrutiny since January, when it emerged that Cevian Capital, Europe’s largest activist investor, had taken a stake and was pushing for an overhaul of the group’s businesses.

In a presentation to shareholders, Vodafone added that one of its priorities was “the pragmatic pursuit of value accretive in-market consolidation in European mobile.”

Vodafone’s latest results come just days after Emirates Telecommunications Group revealed that it had acquired an almost 10 per cent stake in the operator for $4.4bn. The UAE state-owned group said it was supportive of Vodafone’s strategy.

The UK-based telecoms group forecast adjusted ebitda of between €15bn and €15.5bn for the 12 months to the end of March 2023, short of analysts’ consensus of €15.6bn. Vodafone said it would generate €5.3bn of free cash flow, down from €5.4bn last year.

“The current macroeconomic climate presents specific challenges, particularly inflation, and is likely to impact our financial performance in the year ahead,” Vodafone said.

Shares in the company were down 2 per cent in early trading in London.

Although Read has voiced his ambitions for deals in markets including Italy, Spain and the UK, Vodafone rejected a lowball bid from Iliad for its Italian business in February and failed to secure a deal with Spain’s challenger telecoms group MasMovil in spite of months of negotiations.

The Financial Times reported last week that Vodafone had reopened discussions with the Hong Kong infrastructure conglomerate CK Hutchison to combine its UK operations with Three UK.

In Germany, a market that analysts had been watching closely and which accounts for about 30 per cent of the group’s total service revenue, Vodafone reported a 1.1 per cent rise in service revenue and a 6.5 per cent increase in adjusted ebitda to €5.7bn.