Analyst Note
| Michael Hodel, CFA |Vodafone showed improvement in several areas during its fiscal second quarter even as the pandemic continued to weigh on results. Consolidated service revenue declined 0.4% year over year but would have increased 1.5% absent a sharp drop in wireless roaming revenue. The Germany business, Vodafone’s most important, delivered strong cost savings stemming from the Unitymedia acquisition. The firm reiterated expectations for EUR 5 billion in free cash flow during fiscal 2021. Management also highlighted its desire to continue improving returns on capital, a focus we applaud. The planned IPO of its tower business should help in this regard, though management acknowledged that regulation needs to continue moving in a positive direction as well. We don’t expect to materially change our GBX 194 fair value estimate or narrow-moat rating and we believe the shares are attractive.