Vodafone Raises Dividend After Strategic Restructuring and German Recovery

Vodafone has increased its dividend for the first time in seven years, signalling renewed confidence as its largest market in Germany returns to growth. Chief executive Margherita Della Valle’s restructuring appears to be taking effect, with the company achieving strong operational improvements. Shares climbed by 8.3 per cent to finish at 96.25 pence following an announcement of results at the upper end of profit and cash flow expectations.

Adjusted earnings before deductions are now forecast between 11.3 billion and 11.6 billion euros, with adjusted free cash flow expected in the range of 2.4 billion to 2.6 billion euros. The dividend will rise by 2.5 per cent this year, coinciding with the completion of the UK merger with Three. Vodafone stated it will pursue a progressive dividend policy from this point onwards.

In Germany, regulatory changes last July terminated the practice of housing associations bundling TV packages with rent, forcing Vodafone to adapt rapidly. The company lost about half its customers in this category but has mitigated losses through higher mobile wholesale revenue and successful integration of customers from 1 and 1, a major German telecommunications provider. Organic service revenue in the country increased by 0.5 per cent, outperforming analysts’ forecasts, and mobile service revenue grew by 3.3 per cent.

The UK market also saw organic service revenue growth of 1.1 per cent, buoyed by the merger with Three, increased consumer broadband demand and higher wholesale figures. These gains offset a 2.3 per cent decline in business service revenue, attributed to intense competition and planned contract terminations. Vodafone and Three’s decade-long investment pledge of 11 billion pounds in UK infrastructure has already resulted in supplier contracts for network upgrades totalling over 2 billion pounds and the removal of 16,500 square kilometres of areas lacking mobile signal.

Vodafone’s performance in Africa improved as well, with service revenue up 7.9 per cent to 3.2 billion euros, although local currency depreciation moderated overall growth. Egypt’s results stood out in particular, showing organic service revenue expansion of 42.5 per cent.

The company declared an interim dividend of 2.25 cents and noted that interim payouts will now represent half of the previous full-year dividend. Vodafone is advancing digitalisation efforts in Europe through its generative AI chatbot SuperTobi, handed to around 60 million customers and managing 15 million conversations annually.

Della Valle’s tenure has involved extensive restructuring, simplifying operations by selling underperforming assets in Spain, Hungary and Italy. The completion of these deals fuelled share buybacks and marked the conclusion of her reshaping of Vodafone’s European portfolio. The turnaround culminated in the positive performance in Germany, which accounts for a third of group service revenue. Although competitive pressures in Germany and potential regulatory challenges could affect future results, market reactions have been overwhelmingly positive, with shares rising nearly 29 per cent since the start of the year, outpacing the broader European telecoms sector.