​​Vodafone share price struggles thanks to slow turnaround​

With debt remaining high and revenue growth elusive, the telecom giant faces a challenging path ahead.

​​​CEO's Restructuring Efforts

​Since taking the helm nearly two years ago, CEO Margherita Della Valle has pushed to streamline Vodafone’s operations. Major moves include selling the company’s Spanish and Italian units and initiating a merger with its UK arm and Three, pending regulatory approval. The £15 billion deal is expected to enhance customer numbers and attract investment, potentially revitalising Vodafone’s competitive edge.

​High Debt and Revenue Growth Challenges

​Despite these efforts, Vodafone continues to grapple with significant financial hurdles:

• ​Massive Debt Load: The company's heavy debt burden persists, limiting its capacity for new investments.
• ​Weak Revenue Growth: Revenue expansion remains lacklustre, with the company struggling to gain momentum, especially in its largest market, Germany.

​Market Struggles in Key Regions

​Vodafone’s performance in Germany, its biggest market, remains disappointing, dragging down overall results. The UK, while more stable, is fiercely competitive, further pressuring margins. Expansion into smaller markets, like Romania, is unlikely to make a meaningful impact on the company’s financials.

​Promising Developments: Merger and AI Partnership

​There are, however, glimmers of hope:

• ​Three Merger: The Competition and Markets Authority (CMA) has signalled a potential green light for the merger with Three, seeing it as possibly beneficial for competition in the mobile sector. If approved, the merger could provide a significant boost to Vodafone’s market position.
• ​Microsoft Partnership: Vodafone’s new 10-year deal with Microsoft to integrate generative artificial intelligence (AI) into its services is expected to enhance customer experience for its 300 million users, offering a potential long-term growth driver.

​Financial Outlook and Forecast

​In the previous quarter, Vodafone reported a 2.8% increase in revenue (£7.6 billion) and a 42.9% rise in operating profit (£1.3 billion), but these results fell short of investor expectations. The company maintains its full-year guidance of £9.1 billion in adjusted earnings and at least £2 billion in adjusted free cash flow.

​Looking ahead, organic service revenue growth may slow due to challenges in Germany, with sales expected to decline by up to 7%. However, robust performance in Turkey and Africa could help offset some of the setbacks. EBITDA is likely to dip following strong first quarter (Q1) gains, but operational efficiencies and favourable energy costs may keep the full-year target within reach.

​Vodafone share price – technical analysis

​Vodafone’s share price has seen minimal growth, rising just over 3% year-to-date. Investor sentiment remains cautious, as recent restructuring measures have not yet translated into substantial market gains.

​Almost a year ago, Vodafone’s share price was at the same level it is now, around 72p. However, there are glimmers of hope. It continued to decline into February 2024, but since then a modest uptrend has emerged. A higher low was formed in April around 66p, and during the summer 68p provided support and halted several moves lower.

​Recent price weakness since September has found support around 72p. A close above 74p might help to solidify a bullish view.

​Vodafone share price chart

​Conclusion

​Vodafone’s restructuring and strategic partnerships indicate a potential path to recovery, but the road ahead remains fraught with challenges. High debt, revenue stagnation, and competitive pressures continue to weigh heavily on the telecom giant, leaving investors cautious as they await the upcoming interim results.