Vodafone today said it was set to lose more than 4 million customers in Germany as the telecoms giant prepared for a 400 million euro (£340 million) knock from regulatory change in its biggest market.
The Paddington-based business said it anticipated it would only retain about half of its 8.5 million TV customers based in multi-dwelling units following new laws on those contracts which come into effect in July. The customers are currently worth around 800 million euros annually to the business.
Vodafone CEO Margherita Della Valle said the regulatory changes had been long-anticipated and the business was prepared to adapt.
“This year is going to be a year of transition because of this,” she told the Standard, adding that the German business, which accounts for around two-fifths of the group’s revenue, would be in growth excluding the TV contract losses.
“We have a team in Germany focused on driving growth in other segments.”
Vodafone today reported adjusted group earnings of €11 billion, slightly ahead of market expectations, it confirmed €4 billion in share buybacks funded by proceeds from the sale of its Spanish and Italian businesses. Shares rose 3.32% to 72p.
Della Valle said the company saw strong growth in both its consumer and B2B segments in the UK, and had the lowest level of customer complaints in the market, according to Ofcom – news that it’s hoped will mollify regulatory concerns ahead of a planned £16.5 billion merger with rival Three.
“All engines are firing in the UK” she said, but added: “Even with this growth, our returns are well below the cost of capital and so we need to be in a better position to be able to invest.”
CFO Luka Mucic said the firm had a relatively small proportion of its debt set to mature in the next 12 months, reducing its exposure to higher interest rates, adding that recent disposals would mean not all of it would need to be refinanced.
Mark Crouch, analyst at investment platform eToro, said: ““Vodafone investors may have been bracing themselves for another tumultuous earnings report this morning and while this might not have them jumping for joy, there are signs the business has turned a corner.
“Cost-cutting initiatives have been front and centre in a bid to stem the tide of losses that has plagued the telecoms giant. It is now a case of looking inward for Vodafone, taking stock of what they have and driving up efficiency.”
