Etisalat takes stake as Vodafone reports ‘good’ fiscal year

As it announced its fiscal year results with news of a major shareholding from MENA giant Etisalat, global operator Vodafone is claiming to have delivered on its customer commitments, further deepening relationships with lower customer churn and seeing results from increased capital investment with improvements in network quality.

For the fiscal year that ended 31 March 2022, total group revenue increased by 4% to €45.6bn, driven by service revenue growth in Europe and Africa, and higher equipment revenue, as well as what the company described as favourable foreign exchange movements.

Adjusted EBITDAaL increased by 5% on an annual basis to €15.2bn due to not only revenue growth, but also what Vodafone said was strong cost control, supported by a legal settlement in Italy. Adjusted EBITDAaL margin was 0.5 percentage points higher year-on-year at 33.4%, and operating profit increased by 11.1% compared with the end of the previous fiscal year to total €5.7bn. The group made a profit for the financial year of €2.6bn, up by €2.1bn compared with FY21.

Looking at the highlights of the fiscal year, Vodafone pointed to the fact it had increased its 5G reach in European cities to 294 from 240 over the course of the past 12 months. European on-net gigabit-capable connections rose from 43.7 million to 48.5 million, while Europe on-net NGN broadband penetration remained at 30%. Global internet of things SIM connections increased from 123.3 million to 150.1 million.

Commenting on the Vodafone fiscal year results, group CEO Nick Read said: “We delivered a good financial performance in the year, with growth in revenues, profits and cash flows in line with our medium-term financial ambitions. Our organic growth underpinned a step-change in our return on capital, which improved by 170bps to 7.2%. While we are not immune to the macroeconomic challenges in Europe and Africa, we are positioned well to manage them, and we expect to deliver a resilient financial performance in the year ahead. Our near-term operational and portfolio priorities remain unchanged from those communicated six months ago.”

The company’s financial prospects were boosted by UAE telco e&, Etisalat Group, acquiring approximately 2,766 million shares in the group, representing 9.8% of Vodafone’s issued share capital, for a purchase cost of circa $4.4bn.

The telco said it made the investment in Vodafone to gain significant exposure to a world leader in connectivity and digital services. It added that it regarded Vodafone as one of the strongest and most globally recognised brands across the telecoms industry, with a strong reputation for being a leading digital-first operator, its rigorous approach to corporate governance and well-regulated global footprint making it an attractive opportunity.

Despite making its investment, e& stressed that it was not seeking board representation nor had any intention of making an offer to acquire Vodafone fully.

“Vodafone is one of the leading businesses at the heart of digital communications in Europe and Africa, with a compelling business offering critical connectivity and digital services,” said e& Group CEO Hatem Dowidar.

“Our investment represents a unique opportunity to acquire a significant stake in one of the leading and strongest global telecom brands, and a company that we know well.

“We are looking forward to building a mutually beneficial strategic partnership with Vodafone, with the goal of driving value creation for both our businesses, exploring opportunities in the rapidly developing global telecom market and supporting the adoption of next-generation technologies,” he said.

“We see this investment as a good opportunity for e& and its shareholders as it will allow us to enhance and develop our international portfolio, in line with our strategic ambition.”