British telecoms group Vodafone has posted a hefty after-tax loss for the first half of its financial year, largely due to a massive impairment charge in Germany. The company also announced plans to cut 2,300 jobs in the country, underscoring persistent difficulties in its most important European market.
The group recorded a net loss of €4.79 billion for the six months to the end of September, a sharp swing from the €829 million profit it reported in the same period last year. The bulk of the damage came from a €4.85 billion writedown on its German operations, which Vodafone attributed mainly to adverse movements in interest rates.
Chief executive Margherita Della Valle acknowledged the ongoing challenges in Germany, saying: “I am very happy about our overall group performance, but Germany is not yet where it needs to be.” Her comments came as the company announced the job cuts in Germany, part of a broader restructuring effort.
Revenue growth offsets writedowns
Despite the heavy losses, Vodafone’s top line showed resilience. Total revenue climbed 11.4% to €21.9 billion in the first half, helped by the consolidation of VodafoneThree, the UK joint venture it now fully owns after buying out CK Hutchison’s stake. The integration of Kenya’s Safaricom and Telekom Romania also contributed to the revenue boost.
The company also made progress on cost savings, trimming more than €200 million in the first half as it cut 3,000 staff across Europe. These efforts helped Vodafone raise its full-year outlook, now expecting adjusted earnings of between €13.2 billion and €13.4 billion, up from its previous forecast of €13 billion to €13.3 billion.
Investors reacted cautiously, with Vodafone’s share price dipping 0.8% on London’s FTSE 100 after an initial rise. The market’s wariness reflects the scale of the German problem, which remains the company’s biggest hurdle.
Russ Mould, investment director at AJ Bell, noted that the presence of French tycoon Xavier Niel, who paid €5.1 billion in July to become Vodafone’s largest shareholder, is likely to keep pressure on management. “Niel's presence... is likely to keep the pressure on, with the continuing struggles in Germany the next big hurdle to overcome,” he said.
Della Valle, who took the helm in 2023, has been executing a sweeping overhaul of the company, including thousands of job cuts and the sale of its operations in Italy and Spain. The strategy is to focus on core markets in Germany and the UK, but the German business has been hit hard by regulatory changes that stopped housing associations from bundling TV contracts with rent, a move that has weighed on revenue.
The writedown in Germany is a stark reminder of the challenges facing the telecoms sector across Europe, where intense competition and heavy investment requirements continue to pressure margins. Vodafone’s experience also highlights the broader economic headwinds, including rising interest rates that have increased the cost of capital.
Looking ahead, Vodafone’s ability to stabilise its German operations will be crucial. The company’s upgraded guidance suggests management sees light at the end of the tunnel, but the road to recovery remains long.
