Since January 2025, both Vodafone’s (LSE:VOD) and BT’s (LSE:BT.A) shares have outperformed the FTSE 100, rising by 46% and 29% respectively. And they’ve paid some pretty good dividends too.
Does positive investor sentiment for the UK telecoms sector mean now’s a good time to consider either or both? A bit like a game of Top Trumps, let’s compare the two.
Beauty and the beast?
Based on both companies’ results for the year ended 31 March 2025 (FY25), Vodafone’s revenue was 60% higher and its EBITDA (earnings before interest, tax, depreciation, and amortisation) was 21% more.
In terms of valuation, its shares currently (19 January) trade on 14.8 times historic earnings. BT’s price-to-earnings (P/E) ratio’s a more attractive 9.7.
| Measure | BT | Vodafone |
|---|---|---|
| FY25 total group revenue (£bn) | 20,370 | 32,580 |
| FY26-FY28 forecast revenue growth (%) | -3.7 | 13.1 |
| FY25 adjusted earnings per share (pence) | 18.80 | 6.85 |
| FY28 forecast adjusted earnings per share (pence) | 17.60 | 8.74 |
| FY25 dividend per share (pence) | 8.16 | 3.92 |
| FY28 forecast dividend per share (pence) | 8.41 | 4.17 |
| FY25 free cash flow (£bn) | 1,598 | 2,548 |
| Net debt (excluding leases) at 31.3.25 (£bn) | 15,164 | 19,485 |
| Share price (pence) | 182.7 | 101.5 |
| Market cap (£bn) | 17.8 | 23.6 |
However, it’s the future that really matters. And this is where BT appears likely to struggle. If analysts are right, its revenue will fall by 3.7% by FY28, and its earnings per share (EPS) will be 1.2p (6.4%) lower. By contrast, Vodafone’s expected to see a 13.1% increase in its top line and a 28% improvement in EPS.
Using FY28 forecasts, BT’s P/E ratio is 10.4 and Vodafone’s is 11.6. Taking these figures in isolation, BT’s shares still appear to offer better value. But Vodafone seems to have the momentum and looks to be going in the right direction after experiencing a difficult few years.
Tough times
The group’s been struggling in Germany, where its losing customers due to a change in law preventing landlords from bundling TV contracts with tenancies. It’s also been wrestling with a large debt pile. To reduce its borrowings, the group decided to downsize.
At 31 March 2025, its net debt (excluding leases) was 1.96 times FY25 earnings. By comparison, BT’s ratio was 1.93. Analysts aren’t predicting absolute levels of net debt for either business to change much by FY28, although given that they expect Vodafone’s earnings to grow, its indebtedness relative to profit will fall more.
Currently, BT’s debt appears to be marginally more manageable. But again, Vodafone’s is showing an improving trend.
And when it comes to investing, a visible improvement in financial performance is important and helps drive a share price higher. BT has plenty going for it. It’s well-managed and retains a strong brand. It’s also offering a higher yield (no guarantees, of course) than the FTSE 100. But it appears to be stuck.
Final thoughts
Given that I already own shares in Vodafone, I don’t want to have two British telecoms stocks in my portfolio. Having said that, BT’s not for me anyway. With analysts forecasting falling sales and a flat bottom line, it’s difficult to come up with a compelling investment case.
By contrast, I reckon Vodafone has much more potential to grow its earnings, which is why I think it’s a stock to consider. However, I acknowledge it’s a tough sector. Infrastructure’s expensive and the returns are lower than in other industries.
But in a sign of confidence in its business, Vodafone says it’s going to increase its FY26 dividend by 2.5% and the merger of its UK business with Three should deliver some cost savings. After so many changes, it looks as though the business is finally settling down.
Summing up, if I didn’t already own the stock, I would give it serious consideration.
