Mobile phone giant Vodafone has revealed a rebound in UK revenues as it eyes the completion of its £15bn mega-merger with Three UK in the coming months.
The firm saw UK organic service revenue growth accelerate to 3.3 per cent in its third quarter, up from 1.2 per cent in the previous three months.
It put this down to “significant investments we have made to our customer experience”, while UK mobile service revenues returned to growth in the quarter – up 1.8 per cent – as it added more customers.
But Germany – its largest market, accounting for 34 per cent of group service revenues – saw worsened trading as total sales fell by 7.6 per cent to 3.1 billion euros (£2.6bn) and service revenues dropped 6.4 per cent. The German division has been hit by a law that has barred housing associations from bundling TV packages with rent.
The update comes as Vodafone prepares to finalise its tie-up with Three UK in the “next few months” after getting the green light from regulators at the end of last year in a deal that will create the UK’s largest mobile operator, with some 27 million customers.
Shares fell in morning trading by around five per cent following the update, a deeper drop than the wider FTSE 100 falling about 0.6 per cent as the London Stock Exchange and beyond reacted to a possible global trade war.
Group chief executive Margherita Della Valle said: “When the UK merger completes in the next few months, we will have fully executed Vodafone’s reshaping for growth.
“We are on track to grow in line with our full-year guidance for this year, which we reiterate today, and are looking forward to a stronger Vodafone in the years ahead.”
On the weaker-than-expected performance in Germany, she said: “We are continuing to invest in the turnaround of our German business and we are starting to see improving customer trends, although conditions have become more challenging in the mobile market.”
The robust results in the UK helped the overall group post revenue growth of 5 per cent to 9.8 billion euros (£8.1bn), with a better-than-forecast 5.2 per cent jump in service revenues.
The UK merger forms a part of Ms Della Valle’s turnaround plan at the company, which also includes selling businesses in Italy, Spain and other countries.
However, in order to address competition concerns in the UK with regulators, Vodafone and Three UK agreed to invest billions in rolling out a combined 5G network across the UK.
The companies have also been told to offer shorter-term customer protections, which would require the merged company to cap certain mobile tariffs for three years.
Vodafone will own 51 per cent of the equity and after three years, will have the option to buy the rest of the merged company.
