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Vodafone Group PLC VOD

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Morningstar’s Analysis

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Vodafone Returns to Growth During Fiscal Q3; Shares Remain Undervalued

Analyst Note

| Michael Hodel, CFA |

The recovery in Vodafone’s business continued into its fiscal third quarter, at least on the revenue line (the firm only discloses sales metrics for odd-numbered quarters). Services revenue increased 0.4% year over year excluding currency movements, returning to growth after two quarters of declines. The German business, Vodafone’s most important at more than 30% of revenue, was again a bright spot, with revenue up 1% year over year on solid customer gains. The Spanish business (10% of revenue) also showed strong progress during the quarter, with revenue down only modestly (1.1% year over year) thanks to price increases taken during the quarter. We don’t expect to materially change our GBX 194 fair value estimate or narrow moat rating. Even with the stock responding positively to earnings, we still believe it is attractive.  

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Company Profile

Business Description

With about 270 million wireless customers, Vodafone is one of the largest wireless carriers in the world. More recently, the firm has acquired cable operations and gained access to additional fixed-line networks, either building its own or gaining wholesale access. Vodafone is increasingly pushing converged services of wireless and fixed-line telephone services. Europe accounts for about three fourths of reported service revenue, with major operations in Germany (about 30% of total service revenue), the U.K. (13%), Italy (12%), and Spain (10%). Outside of Europe, 65%-owned Vodacom, which serves sub-Saharan Africa, is Vodafone's largest controlled subsidiary (12% of total service revenue). The firm also owns stakes in operations in India, Australia, and the Netherlands.

Vodafone House, The Connection
Newbury, Berkshire, RG14 2FN, United Kingdom
T +44 163533251
Sector Communication Services
Industry Telecom Services
Most Recent Earnings Sep 30, 2008
Fiscal Year End Mar 31, 2021
Stock Type
Employees 104,135