Vodafones Guidance Raise|Turnaround Story or Acquisition Accounting?

A Turnaround, By the Numbers

Vodafone just delivered the kind of quarter it has been promising investors for three years. Total revenue for the three months to June rose 9.7% to €10.3bn, with organic service revenue up 5.2% and growth showing up in every single segment, from Germany to the UK to Africa. The market's response was immediate: shares jumped over 4% on the day.

Chief executive Margherita Della Valle used the results to raise full-year guidance, now targeting adjusted EBITDAaL of between €13.0bn and €13.3bn, up from a prior range of €11.9bn to €12.2bn. Management says it now expects to land at the upper end of that new range.

The Safaricom Effect

But that upgraded guidance range isn't simply the reward for a stronger underlying business. It reflects the full consolidation of Kenya's Safaricom, after Vodafone's investee Vodacom completed a deal in June lifting its effective stake to 55%. From July, Safaricom's Kenyan and Ethiopian earnings are folded straight into the group numbers.

Strip away the acquisition effect and the picture is more mixed. UK mobile service revenue actually declined 0.7% on an organic basis in the quarter, partly because Ofcom's crackdown on mid-contract price rises is now working its way through the numbers. The number of UK mobile contract customers fell by 48,000 during the quarter.

Growth and the Axe, Side by Side

The same trading update confirmed that Vodafone shed more than 1,200 roles across Europe and its shared operations in the three months to June, as part of a cost programme targeting €2bn in savings between 2027 and 2030. The company has not disclosed how many of those cuts fall in the UK, and says some came through natural attrition rather than layoffs.

That job-cutting announcement landed in the same week shareholders approved a £10.13m pay package for Della Valle, covering £1.46m in fixed pay plus £8.67m in bonuses and long-term share awards. The remuneration committee attributed the sum to stronger performance and a higher share price. Just over 9% of votes cast were against the policy.

Market analysts read the quarter as validation of a strategy that has taken years to show through in the numbers. Mark Crouch at Etoro said Vodafone has for years promised its turnaround would eventually show through in the figures, and that this latest update suggests that promise is finally starting to become reality. He pointed out that while the Three UK merger and Safaricom consolidation flattered the headline revenue figure, the more telling signal is that the underlying business appears to be building genuine momentum.

What the Market Is Really Pricing

The Three UK integration remains central to the long-term case. Vodafone says spectrum and network sharing activation is ahead of plan, with roughly 50 million people — about 70% of the UK population — now able to access VodafoneThree's 5G network, and 5G download speeds already up around 50%. Management is targeting £700m in annual cost and capital expenditure synergies from that merger by the 2030 financial year.

Vodafone has also resumed dividend growth for the first time since 2018, alongside €4bn in share buybacks completed over the past two years. Whether that progressive dividend policy is sustainable now hinges on the same question dividing analysts on the stock: whether the growth investors are cheering is durable operating improvement, or a one-off flattered by acquisition accounting and job cuts that cannot be repeated indefinitely.