The last five years has been a disaster for long-term owners of Vodafone (LSE:VOD) shares.
The FTSE 100 telecoms giant has suffered sales weakness in key European markets, high operating costs, and soaring debt levels that have forced it to cut the dividend.
These pressures have seen Vodafone’s share price topple 57.6% since early 2020 to current levels of 65.68p. This means someone who invested £10,000 in the business five years ago would now have a stake worth roughly £4,238.
However, CEO Margherita Della Valle has a plan to turn things around. And she’s been making solid progress since becoming the telecoms titan’s chief two years ago.
While they’ve proven a disaster for many investors in the past, could now be a good time to consider buying Vodafone shares?
Bold strategy
So far on Della Valle’s watch, Vodafone has hived off its underperforming Spanish and Italian assets, the proceeds of which have been used for share buybacks and to pay down debt.
Following last year’s sale of Vodafone Spain, net debt fell by $1.4bn in the 12 months to September, to $31.8bn. The sale of Vodafone Italy was completed shortly afterwards.
The firm’s also vowed to double-down on the Vodafone Business arm and is embarked on extensive streamlining to cut 11,000 roles from its global workforce (though admittedly, the company still has a lot of heavy lifting to do in the final year of its job-reduction plan).
Finally, Vodafone UK has successfully got its merger with industry rival three over the line. Della Valle has said the deal will “complete our programme to reshape the group for growth“.
Opportunities and risks
With Vodafone now much closer to its CEO’s vision, the firm looks to me better placed to exploit its enormous market opportunities.
As our lives become increasingly digitalised, demand for telecoms services is tipped to rise strongly, even in mature markets like Europe. Growth is likely to be even greater in Africa, where the FTSE firm offers mobile and financial services.
Yet while it’s in a better place, Vodafone still has a number of challenges to overcome. Competition remains fierce across its markets, while capital expenditure costs are severe, impacting the company’s path of debt reduction.
Vodafone also has a job on its hands to turn around its ailing German market following recent changes to bundling laws.
Latest financials showed group service revenues up 5.6% between October and December. But in Germany, the company’s single largest territory, they reversed 6.4%.
Attractive value
Following years of pressure, City analysts think the business is poised for a sharp rebound. They think it will record another 13% earnings reversal this financial year (to March), before enjoying strong growth of 18% in both fiscal 2026 and 2027.
These forecasts leave Vodafone shares trading on a low price-to-earnings (P/E) ratio of 8.5 times for the upcoming financial year. This may make it attractive to value chasers, with its 6.4% forward dividend yield providing a juicy bonus.
As mentioned, Vodafone still has considerable problems to overcome. But given the cheapness of its shares and enormous long-term opportunity, I think the FTSE 100 firm could be a top recovery play to consider.
