As Vodafone updates the market Graham Spooner, our investment research analyst, explains what it could mean for investors
Vodafone sales hit by strong competition in India and the UK
- Vodafone warns that full year results will be at the lower end of expectations
- Tough competition in UK and India has been mitigated by strong performance in Africa and Europe
- The Share Centre recommends Vodafone as a ‘buy’ for low to medium risk investors seeking income
Vodafone’s European and African operations helped drive Q3 service revenues, beating analysts’ forecasts, but the company has warned that tough competition in India and the UK will cause full year earnings to fall at the lower end of expectations. Organic revenue growth was reported to grow by 1.7% in the quarter.
Vodafone has updated its full year guidance confirming that it expects free cash flow of at least €4bn and organic earnings before interest tax and depreciation to be in the 3%-6% range, as uncertainty in its India operation is mitigated by Africa and Europe.
There has already been a fair bit of merger and acquisition activity in the sector over the last year as rivals consolidate and offer quad-play services (telephone, TV, broadband and mobile), and Vodafone will need to do the same to help drive earnings forward. Investors will be hoping that plans to merge its Indian subsidiary with Idea Cellular, announced on Monday, will bear fruit.
We currently recommend Vodafone as a ‘buy’. The good dividend yield should make this an attractive stock for income seekers willing to take on a low to medium level of risk.
All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.