The Vodafone Group cut its cash flow forecast for the full year and lowered its earnings guidance following soaring energy costs and deteriorating performance in Germany, Italy and Spain. Chief Executive Nick Read said the European mobile operator faced a “tough macroeconomic environment” that forced him to cut cashflow forecasts by € 200 million to around € 5.1 billion. ($ 5.3 billion) for the year to the end of next March. “We are taking a number of measures to mitigate the economic environment of high energy costs and rising inflation,” Read said.
Vodafone is currently raising prices in 11 out of 12 markets, with most of the increases related to inflation. The group, which will face an increase of € 300 million in its energy bill this year, also plans to cut costs of € 1 billion over the next three and a half years, including a simplification of tariffs. There will be an impact on jobs, the CEO said, although roles such as software engineers will still increase. Vodafone lowered its adjusted core earnings target to € 15 billion and € 15.2 billion, from € 15-15.5 billion previously.
Looking at individual markets, the decline in service revenue in Germany accelerated in the second quarter, falling to – 1.1% from – 0.5% in the first quarter, mainly due to the loss of broadband customers. Performance in Italy and Spain also deteriorated quarter to quarter due to intense competition. Great Britain, on the other hand, represented a strong point, with a strengthening of revenues from services after the increase in consumer prices and a return to growth in the business segment. In the UK, Vodafone wants to merge its British network with Hutchison’s Three in an operation that, it says, will increase investment in the network. Read said the negotiations are progressing well.