Proactive Investors - Vodafone Group PLC (LON:VOD) boss Margherita Della Valle confirmed she is mulling potential options for its Italian arm after delivering results that one analyst said were "a checklist of everything bad about a company".
With its mountainous debt pile worrying investors ever more as interest rates have erupted in the past two years, when Della Valle was appointed in April she vowed to simplify the company and focus on customers.
After recently agreeing the sale of its business in Spain to Zegona for €5 billion, Italy was also rumoured to be on the block, according to local reports in the Il Sole 24 Ore financial newspaper.
The article cited potential buyers or partners including Fastweb and Iliad, which are both present in Italy and are reported to have already started to study the unit.
Reasons for potential sale
"We are considering a range of options," the chief executive of the FTSE 100 telecoms group told reporters after the release of results sent the shares down 4% to 74.28p on Tuesday.
"We don't have deadlines, we don't have timelines," she added.
The past quarter saw a return to growth in Germany, which Della Valle said meant Vodafone was now growing in 14 out of 17 markets.
Two of the remaining three "challenging" markets are minor, leaving Italy still hanging in the air as the last major hurdle.
It was noted by analysts at Barclays (LON:BARC) that Italy had been one of the group's best overseas businesses until the disruption from the entrance of Iliad.
In February 2022, Iliad made an €11 billion bid for Vodafone's Italian business, rejected by the board, which considered that selling at that price was not in the best interests of its shareholders.
Barclays said it now values the Italian arm at €9.3 billion (£8.1 billion).
Results disappoint
First-half results from the company showed revenue shrank 4% to €21.9 billion for the six months ended 30 September due to currency swings and disposals.
Operating profit tumbled 44% to €1.66 billion and at the pre-tax line, it swung to a loss of €155 million from a €1.2 billion profit a year ago.
Della Valle hailed improved revenue growth “in nearly all of our markets” and said, “Vodafone's transformation is progressing”.
But the shares fell below 75p again, not far off the 25-year lows seen in the summer.
But the results “are a checklist of everything bad about a company,” said Russ Mould, head of investment at AJ Bell. "It has swung to a loss-making position, revenue is down, the dividend is not growing and there is negative free cash flow."
Net debt increased to €36.2 billion from €33.4 billion at the end of March, primarily driven by the free cash outflow of €2.0 billion and €1.2 billion doled out in dividends.
“We’ve got the usual rhetoric from the chief executive that the turnaround story is making progress but at the end of the day it’s yet another set of results that remind us how Vodafone has lost its way big time,” said Mould.
“Work is underway to restructure the group but don’t hold your breath for rapid change.”
Albie Amankona, telecoms analyst at Third Bridge, noted that net customer additions remained "subdued" but the second quarter rebounded from losses in the first.
"Legacy telcos are competing for new subscribers in the youth market against challengers such as Iliad and Digi."
The losses indicated that further operational cost management is necessary, Amankona added.
"Having completed 30% of their targeted savings program by FY26 and having implemented the easiest opex reduction methods first, it could imply that the opex management program lacks ambition. This echoes the skepticism of our experts, who doubt whether the planned opex reduction program will yield the required results."