(Bloomberg) -- Vodafone Group Plc beat estimates and expects sales to recover from a first half when Covid-19 lockdowns sent mobile roaming income tumbling.

  • Vodafone’s organic service revenue fell 0.4% in the financial second quarter that ended on Sept. 30, better than the 2.3% average estimate of analysts compiled by Bloomberg.
  • Europe’s second-biggest phone company nudged up its outlook, seeing full-year adjusted earnings before interest, tax, depreciation and amortization between 14.4 billion to 14.6 billion euros ($17.1 billion to $17.3 billion), versus previous guidance of “flat to slightly down” on last year’s rebased total of 14.5 billion euros.

Key Insights

  • Investors are focused on proceeds from an expected initial public offering of Vantage Towers, the mobile mast unit spun out from Vodafone that could be one of the biggest European IPOs of 2021. The tower firm holds a capital markets day on Tuesday.
    • Vodafone is considering raising about 4 billion euros from the Frankfurt IPO, people familiar with the matter told Bloomberg last week.
  • The move is vital to Chief Executive Officer Nick Read’s effort to squeeze more value from Vodafone’s assets, pare down a 44 billion-euro debt burden and pay for network upgrades.
    • “Covid-19 and the reduction in roaming revenues, through the significant reduction in international travel, is currently obscuring our underlying commercial progress,” said Read on Monday.
  • Read is also trying to simplify Vodafone’s sprawling operations and stabilize results in difficult markets such as Spain. Reports in September of talks between Vodafone and Spanish rival Masmovil Ibercom SA led to speculation of a potential tie-up. Masmovil denied the reports and Vodafone declined to comment at the time.

Market Context

  • Vodafone shares have risen along with other stocks in recent weeks on optimism over a coronavirus vaccine. They are still down 18.6% in the year to date, versus a 15% fall in the Stoxx Europe Telecommunications index.
  • Of analysts surveyed by Bloomberg, 20 rated the stock a Buy, 4 Hold, and 2 Sell.

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  • Read was joined by new chairman Jean-Francois van Boxmeer earlier this month.
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