Vodafone Earnings: More Is Needed in Light of Struggles in Germany

Vodafone’s German business struggled in the third fiscal quarter. German service revenue was down 6.4% organically (6.2% and 1.5% decline in previous two quarters), with the TV business as the main underperformance factor. Unsurprisingly, German adjusted EBITDAaL will see a sequential decline in the second half of the year. We are trimming our fair value estimate to GBX 89 from GBX 94, as we model stronger headwinds for Vodafone Germany. We now model a 5.5% decline in Germany service revenue in 2025, followed by a 4.2% and 3.6% decline in 2026 and 2027, respectively, driven by more TV customer losses. We also assume a German adjusted EBITDAaL margin of 36.5% long term, compared with 37.5% previously.