Vodafone Is Making a Profit Again. Here’s Why the Shares Fell 9%.

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Vodafone is launching a 5G mobile data network in the U.K.

Photograph by Tolga Akmen/AFP/Getty Images

Vodafone Group

‘s U.S.-listed shares were falling almost 9% on Wednesday. The mobile phone giant saw annual revenue tumble 2.6% because fewer customers, unable to travel abroad during the pandemic, paid roaming charges.

The market also reacted negatively to plans by the U.K.-based telecom group to increase capital expenditure to expand its network. It is competing with rivals such as

BT Group

(BT.A.UK), which is also investing to capture a bigger slice of the market.


Vodafone Group

(VOD) did manage to post a €536 million ($655 million) profit for the year ended March 31, bouncing back into the black from the €455 million loss seen in 2020. It recorded €43 billion in revenue, a decrease from €44 billion in 2020.

The company maintained a total dividend of nine cents per share, prompting Richard Hunter, an analyst at Interactive Investor, to say: “For the income-seeking investor, a dividend yield of around 5.7% remains punchy and is clearly an affordable and desirable part of Vodafone’s strategy, which should keep it ringfenced from other drains on capital.

“The dividend has long been an attraction of the stock and has partially mitigated a tepid share price performance over recent years.”

The company credited the pandemic with accelerating existing long-term trends such as remote working, greater adoption of cloud technology, and digital payments.

Nick Read
said in a statement: “The world has changed. The pandemic has shown how critical connectivity and digital services are to society. Vodafone is strongly positioned and through increased investment, we are taking action now to ensure we play a leadership role and capture the opportunities that these changes create.”

The extra investment will be spent on installation of new towers that connect to its customers, hiring more software engineers, and cloud-based services.

The company said it has delivered on the first phase of its strategy to reshape itself and it is now focused on Europe and Africa, and that the future is in digital services and new technology to enhance connectivity. But much depends on Read’s execution of this next stage in the strategy.

William Ryder, an analyst at Hargreaves Lansdown, was upbeat on the stock, saying: “Vodafone’s overall strategy makes sense to us and the focus on Europe and Africa should provide a balance between mature and growth markets going forward.”

Vodafone’s ADRs were down 8.9%, at $18.45, in recent trading. The

S&P 500

was down 0.4%.

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