May 15, 2019

Vodafone faces growth test after cut to dividend

Having talked up a "Transformation" that would deliver on its long-awaited growth potential, the company cut its dividend by 40 per cent. The tail-off in growth combined with the rising cost of spectrum in Germany - Vodafone is already on the hook for €1.7bn - forced the company into the painful decision to slash its annual dividend. Vodafone also reported a 5 per cent rise in 'internet of things' revenue, one of Vodafone's key new growth areas, although the €783m it booked for the year was a fraction of the company's overall service revenue of €39.2bn. The company faces a struggle to shake its low-growth image. Jerry Dellis, an analyst with Jefferies, said the dividend cut meant "Management must now convince that Vodafone is capable of returning to growth" to deliver on its promise to return to a progressive dividend policy. Vodafone admitted on Tuesday that the dividend cut gave it the option to invest more in its network, but reducing its debt mountain of €26bn remains the priority.

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