The Vodafone (LSE:VOD) share price was last above £1 in March 2023. It’s currently (13 December) languishing just below 70p. And despite attempts to improve the financial performance of the telecoms group, it appears to be going nowhere. A steady flow of apparently positive news has also failed to ignite the company’s shares.
Stuck in the doldrums
For example, on 9 December, the company revealed what the merger with Three will mean from a financial perspective.
Annual cost and capital expenditure synergies of £700m are expected by the fifth full year post-completion. Overall, the company claims these savings have an implied net present value of “over £7bn”.
So how did the market react to this apparently goods news? Well, the share price fell 1.8%.
This could suggest that the benefits from the merger with Three were already priced in to the stock. But since the proposed deal was announced on 14 June 2023, Vodafone’s shares have fallen in value by nearly 5%.
As a shareholder, I find this very frustrating.
Turnaround plan
But the company’s directors are trying to improve the situation.
In recent years, the group’s exited its under-performing markets in Ghana, Hungary, Spain, and Italy. It’s also sold-off some non-core infrastructure assets to help reduce its borrowings.
And although its cut its dividend twice in five years, the stock’s decline means it’s still yielding 5.4%.
Vodafone also looks cheap when profits are considered. Its forward price-to-earnings (P/E) ratio (9.9) is lower than the average of 202 listed European telecoms businesses (14.1).
And despite its downsizing, it still retains 330m customers in 15 countries.
Could it reach 100p?
Based on a current share price of 69.3p, to break through the £1-barrier, the company’s market cap would have to increase by 44% (£7.8bn). With a P/E ratio of around 10, that’s equivalent to a £780m increase in annual earnings.
Yet we’ve already seen that a similar level of savings from the Three merger has failed to move the share price.
But a look at the company’s accounts could explain the lack of enthusiasm from investors.
On a like-for-like basis, the restructuring plan doesn’t appear to be having much of an impact.
Comparing the first six months of its 2025 financial year with the same period in 2024, Vodafone’s revenue was up only 1.6%. And adjusted EBITDAaL (earnings before interest, tax, depreciation, and amortisation, after leases) — the company’s preferred measure of profitability — was down 0.3%.
However, this hides some variations between its markets. Germany was the only territory in which both revenue and adjusted EBITDAaL was down. Excluding the company’s biggest territory would’ve seen a 7.6% rise in profits.
Unfortunately, Germany cannot be ignored — it accounts for 30% of revenue.
And despite falling €5.7bn (10%) in 12 months, the group’s borrowings less cash at 30 September, were €48.7bn (£40.4bn)
Final thoughts
Vodafone was once the UK’s most valuable listed company.
Today, it feels like its share price is stuck. For it to reach £1 again, I suspect investors will want to see earnings growth in Germany, significantly lower debt and further proof that the deal with Three will deliver an improved financial performance.
This may take longer than I’d hoped. Therefore, with the benefit of hindsight, I wish I’d never taken a position!
