Germany is the group’s biggest market and continues to affect overall financial performance, although growth in Africa and Turkey offset the damage

Margherita Della Valle, CEO, Vodafone Group (pictured), said about the company’s half-year earnings (for financial year 2025), announced today, “I am confident that the actions we are taking will deliver growth for Vodafone this year and a further acceleration into FY26.”

Vodafone Group doubled its profits in the first half of its current financial year (to end of September) compared with the first half last year, as overall income grew and some costs fell. Pretax profit for the first half were €2.11 billion, up from a restated €830 million the year before.

Results for the first half of 2023 were restated to flag that operations at Vodafone Spain and Vodafone Italy are “discontinued” as both businesses have been sold.

Adjusted earnings before interest, tax, depreciation, amortisation and adjusted loss (EBITaL) was €5.4 billion for the half-year, similar to the year before, but an increase of 3.8% on an organic basis.

Revenue grew 1.7% to €18.28 billion from €17.98 billion last year and financing costs fell 40% to €843 million from €1.40 billion. ’Other income’ contributed €533 million whereas in the same period last year, it cost €67 million.

Less positively, a number of costs rose. They include: the cost of sales which went up by 0.8% to €12.12 billion from €12.02 billion; selling and distribution expenses were up by 5.4% to €1.36 billion from €1.29 billion; and administration increased 5.9% to €2.70 billion from €2.55 billion.

No sign of progress in Germany

Perhaps most worrying, there appears to be no progress in Germany. The statement read: “Total revenue decreased by 4.4% to €6.1 billion as a result of lower service and equipment revenue. As anticipated, service revenue declined by 3.9% (Q1: -1.5%, Q2: -6.2%), primarily due to a 2.6 percentage point impact (Q1: -1.2 percentage points; Q2: -3.8 percentage points) from the end to bulk TV contracting in Multi Dwelling Units (‘MDU’), which came into full effect from July 2024, as well as a lower broadband customer base following price increases in the prior year.

“The decline in quarterly trends was primarily driven by the full impact of the TV law change and the lapping of broadband price increases in the prior year. the group’s biggest market.”

Yes, we all know, and all knew, about the changes in the law regarding multi-tenanted dwellings, long before they came into force in the summer. Clearly, they have dealt Vodafone a blow, but arguably one it did not take evasive action or have Plan B soon enough. Julie Palmer, Partner at Begbies Traynor, an independent business recovery specialist, stated, “Vodafone’s grip over Germany, for years its strongest market, is weakening.”

She noted that, “Vodafone’s interim results this morning will likely not move the dial much with investors. The mobile network operator reported a 1.6% increase in revenues, a solid if unspectacular achievement that speaks of its inability currently to gain significant momentum.”

Vodafone’s share price in London fell 4.1% the announcement.

Slowing growth in Africa and Turkey?

Vodafone said “an anticipated slowdown” in its German market was offset by growth in other European markets, Africa and Turkey.

Palmer added, “Competition in the UK remains as tough as ever. While Vodafone might be investing heavily in its broadband technology in both these regions [the UK and Germany], it is the African and Turkish markets which are showing clear signs of growth.”

In Turkey, Vodafone stated total revenue increased by 23.3% to €1.4 billion, with service revenue growth partly offset by depreciation of the local currency versus the euro in prior quarters. However in all areas, Q2 growth was less than Q1.

In South Africa, service revenue growth was due in part to higher prices for consumers on mobile contracts implemented in the first quarter, and good fixed line growth in Consumer and Business. Here too, though, growth slowed in Q2 due to a drop in consumers’ prepaid mobile, “which faced a tough comparative”. Financial services revenue grew by 11.7% to €86 million, supported by growth in insurance services. 

In Vodacom’s international markets (outside of its domestic market, South Africa – see this report), service revenue growth was supported by a higher customer base and strong M-Pesa and data revenue growth. M-Pesa revenue grew by 6.4% to €200 million, and now represents 27.0% of service revenue. 

UK success depends on execution

“A sense of stasis is not for want of trying, and there will be plenty of eyes on its ability to execute the merger with Three successfully now it has the provisional all-clear from the CMA [Competition and Markets Authority], continued Palmer. “The landmark project of CEO Margherita Della Valle will see the telecom landscape of UK changed forever, but investors will need clear evidence that it can be earnings-enhancing and signs that any provisions instigated by the regulator do not tie its hands.

“The recent selling-off of the telecoms giant’s Spanish and Italian arms has allowed it to cut-down on costs and address the high level of debt it still has. If the deal with Three does indeed complete, we may see the FTSE 100 stalwart finally start to undergo the successful turnaround it has long been crying out for, but time will tell if the latest telecoms mega deal is supportive of that.”