Vodafone Group restructures portfolio and capital allocation

LONDON: Vodafone Group Plc has finalized its portfolio restructuring, initiated in May 2023, with the sale of its Italian operations to Swisscom AG. This move follows the divestiture of Vodafone Spain and the merger of Vodafone UK with Three UK, allowing Vodafone to concentrate on growth markets in Europe.

The company’s strategic shift includes a focus on B2B, particularly SMEs and public sector clients, leveraging digital services and generative AI. Vodafone’s B2B service revenue grew by 5% in Q3 FY24, outperforming competitors. Investments and partnerships, such as with Microsoft, are planned to enhance Vodafone’s platforms and capabilities.

In Africa, Vodafone aims to expand its market leadership in mobile and fixed connectivity and its FinTech platform, which serves over 75 million customers.

Operational excellence will be pursued through customer experience improvements, operational simplification, and cost management. Central operations will transition to a commercial model by FY25, enhancing flexibility and efficiency.

Organizational changes are also on the horizon, with Vodafone restructuring into five divisions: Germany; European Markets; Africa; Vodafone Business; and Vodafone Investments. Philippe Rogge will depart as CEO of Vodafone Germany.

The sale of Vodafone Italy is valued at €8 billion, with Swisscom agreeing to pay approximately €350 million annually for continued services. The transaction is subject to shareholder approval and regulatory clearances, with completion targeted for the first half of 2025.

Vodafone’s capital allocation review maintains country-level capital intensity and introduces a new leverage policy of 2.25x – 2.75x Net debt to Adjusted EBITDAaL. The FY24 dividend is set at 9.0c per share, with a rebase to 4.5c from FY25. Share buybacks of up to €4.0 billion are anticipated following the sales of Vodafone Spain and Italy, aiming for a total return increase to €3.1 billion for FY25.

This strategic overhaul marks a significant pivot for Vodafone, positioning it for sustained growth and shareholder value enhancement in a rapidly evolving telecommunications landscape.

Margherita Della Valle, Group Chief Executive, said, “Today, I am announcing the third and final step in the reshaping of our European operations. Going forward, our businesses will be operating in growing telco markets – where we hold strong positions – enabling us to deliver predictable, stronger growth in Europe. This will be coupled with our acceleration in B2B, as we continue to take share in an expanding digital services market.

The sale of Vodafone Italy to Swisscom creates significant value for Vodafone and ensures the business maintains its leading position in Italy, which has been built through the dedicated commitment of our colleagues to serving our customers over many years.

Our transactions in Italy and Spain will deliver €12 billion of upfront cash proceeds and we intend to return €4 billion to shareholders via buybacks, as part of our broader capital allocation review.”

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