Vodafone Earnings: Volume Deterioration Undermines Turnaround Credibility; Cost Discipline Needed

Key Morningstar Metrics for Vodafone Group

• Fair Value Estimate
  : GBX 89
• Morningstar Rating
  : ★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : Medium

What We Thought of Vodafone Group’s Earnings

Vodafone’s fourth-quarter and fiscal 2026 results were rather disappointing, with subscriber net losses accelerating in Germany and the UK.

Why it matters: Although Vodafone reported 1.3% service revenue growth in Germany in the fourth quarter and flat service revenue in the UK, underlying volume trends are deteriorating, and we see no path to a rerating in the stock unless management demonstrates a credible shift in operating performance.

• Mobile subscriber losses accelerated, with a loss of 242,000 customers in Germany and 263,000 in the UK sequentially. Broadband deterioration also accelerated in Germany with sequential net losses of 90,000 compared with 63,000 last quarter.
• For almost a year, we expected Deutsche Telekom’s market share in Germany to plateau after three years of relentless expansion. Current data changes our view, and Deutsche Telekom appears to still have room for moderate share gains in 2026, especially in mobile, where its Congstar brand is doing well.

The bottom line: Although we raise our fair value estimate to GBX 100 as we roll our model one year forward, we’re not optimistic about Vodafone unless something changes. Shares look overvalued.

• Vodafone trades at roughly 4 times forward enterprise value/EBITDAaL. A rerating to a 5 times multiple would imply 40% upside to our fair value estimate, assuming net debt remains constant. But that rerating requires strong cost discipline and a credible two- or three-year plan that bumps EBITDAaL growth to midsingle digits organically.
• As a large conglomerate, Vodafone likely carries significant cost duplication relative to leaner, single-market peers. The opportunity exists, but progress has been underwhelming. Orange, by comparison, is doing a much better job of keeping costs in check.

The long view: Management’s appetite for buybacks doesn’t provide any meaningful benefit for shareholders in our view. The priority should be turning the operating businesses around, especially in Germany and the UK.