RE: Hope for dividend growth as outlook improves19 Sep 2025 16:00
In some ways this is a good thing: it’s a reflection of Vodafone’s improving growth prospects. Last year, the German business was impacted by a change in regulation that ended landlords’ right to bundle TV contracts together, meaning telecoms have to negotiate individually with tenants instead. This was a significant obstacle to growth, but Vodafone said in its July trading update that the market has “started its improvement trajectory”.
German revenue fell 3.2 per cent in the three months to 30 June (Vodafone’s first quarter), but the trajectory of growth is improving. In the quarter prior to that total revenue was down 6 per cent.
Vodafone’s most promising area of growth remains the fast-growing African market. In the first quarter, African revenue rose 13.8 per cent. This was helped by 20 per cent growth in its M-Pesa payments business. M-Pesa is a money transfer product and now makes up over 29 per cent of the company’s African service revenue. It added 900,000 new users in the period to bring total customers to 26mn.
Africa is one of the few parts of the world that still has a growing population, and the lower levels of internet infrastructure on the continent means people are even more reliant on their smartphones. For a while, Africa’s business was too small to impact the wider Vodafone group, but it now makes up 20 per cent of total revenue and is on the brink of overtaking the UK as its second-largest market.
There is hope, though, that Vodafone’s recent merger with Three UK will accelerate growth. In the first quarter, however, organic mobile growth was just 0.4 per cent as it struggled to push through further price rises.
The Three deal has lowered Vodafone’s average revenue per customer (ARPU). In other words, Three customers were paying less for their contracts than legacy Vodafone customers. However, management says this is “a trend which was expected and will be addressed through the benefits of the integration plan”. This sounds like price rises for Three customers are coming, presumably with the justification that it is able to offer a better mobile service.
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