Vodafone, the European mobile giant, recently announced its third-quarter results, revealing a concerning trend in its largest market, Germany. Despite positive performance in other regions, the company’s shares dropped over 6% due to a worsening situation in Germany. This decline erased the gains Vodafone had accumulated over the past year.
The company’s service revenue in Germany fell by 6.4% during the third quarter. This represents a further deterioration from the 6.2% drop experienced in the second quarter. Vodafone attributes this decline to the ongoing effects of changes in pay-TV laws and heightened competition in the mobile sector.
Addressing the German Decline
Margherita Della Valle, Vodafone’s Chief Executive, acknowledged the challenges in Germany and outlined the steps taken to address them. These measures include leadership changes and targeted investments to revitalize the business. However, she cautioned that it will take time for these efforts to translate into improved profits.
“We are committed to turning around our German business,” Della Valle stated. “We are seeing some positive customer trends, but the mobile market has become more competitive.” She emphasized that the company is actively investing in improvements and remains focused on regaining its footing in this crucial market.
Impact of Pay-TV Law Changes
One significant factor impacting Vodafone’s performance in Germany is the end of bulk pay-TV contracts for apartment blocks. This change, which came into full effect last year, has led to customer losses. Vodafone has lost over half of the customers affected by this change, leaving it with 4.1 million households by the end of December.
Della Valle reassured investors that these losses are in line with expectations. However, she acknowledged that the financial impact will linger for a few quarters. “The market has been more promotional than usual around Christmas and Black Friday,” she explained, adding to the challenges faced by the company in Germany.
Positive Performance in Other Regions
While Germany presents significant hurdles, Vodafone’s overall performance shows some bright spots. The group’s total service revenue grew by 5.2% in the third quarter, driven by strong results in the UK, Turkey, and Africa.
In the UK, where Vodafone is merging with rival Three, service revenue increased by 7.6%. This growth was fueled by the addition of 37,000 mobile contract customers and 72,000 broadband customers. The merger, expected to be finalized in the coming months, is anticipated to further strengthen Vodafone’s position in the UK market.
