Vodafone is reportedly going to announce a 40% rise in H1 earnings.
The Wall Street Journal has reported that Vodafone will see a 40% earnings rise for the last six months, when it announces its H1 results on November 13. This figure is well above both analyst expectations and the company’s forecasts.
The report follows Vodafone’s announcement that subscriber numbers increased by just 2.5 million in Q3 (compared with three million in Q2 and 4.4 million in Q1). However, the main reason was consumers opting out of less profitable prepaid services; the rate of signing up more lucrative contract customers actually increased.
Vodafone has stopped trying to sign up as many customers as possible in favor of boosting margins. In developed markets, this is sensible. Apart from the obvious boost to the bottom line, it will be much easier to upgrade high-spending contract customers to new data services.
More interesting, however, was that much of the growth in subscribers came from Vodafone’s 45% stake in US operator Verizon Wireless. The US is still a fast-growing market for mobile telecoms. With near-total national coverage, Verizon Wireless is in an excellent position to capitalize on this growth – and to gain from the introduction of data services.
At present Vodafone has a lot of capital tied up in Verizon Wireless without management control. All fine – until Vodafone and 55% shareholder Verizon disagree. And over the next few years, as wireless data and 3G services are rolled out across the US, there will be plenty of opportunity for disagreement – which standard to use; whether to use Vodafone’s Vizzavi mPortal; and so on.
Vodafone has had a simple approach in the past to partners it disagrees with: it buys them and sells the non-mobile business, with Mannesmann the most obvious example. Vodafone and Verizon are both currently valued at $150 billion, with Verizon’s core business expected to grow slower than Vodafone’s. Particularly if Vodafone’s earnings keep growing, a transatlantic bid to dwarf its previous deals could be on the cards before too long.
