Image Source: Vodafone Group Plc
Vodafone (LSE: VOD) Shares rose by more than 7% yesterday (May 20) after the group’s results for the year ended March 31, 2025 were announced. But after a day of reflection, I still don’t understand it.
Throughout the year, the company’s directors have informed investors that Ebitdaal (revenue before interest, tax, depreciation and amortization after lease) is 11 billion euros. And they were right. With the announcement of “regular business,” stock price movements become a bit of a puzzle for me.
Sometimes it’s hard to believe that Vodafone was once FTSE 100The most valuable company. The collapse from grace was spectacular. Over the past five years alone, the stock price has exceeded 40%.
In contrast, Europe’s largest telecommunications carrier, German Telecomit seems to go from strength to strength. Since May 2020, the stock price has risen by almost 150%. In 2024, adjusted EBITDAAL increased by 7.9%, while Vodafone was flat.
Contrasting performance
And what sets the two groups the most apart is their performance in Germany.
Donating 32% of the revenues, the country is Vodafone’s biggest market. In the case of Deutsche Telekom, it ranks second, accounting for 22% of its net revenue. Impressively, the group has only been recorded for 34 consecutive times of Ebitdaal’s growth on the territory.
However, Vodafone was severely affected by changes in the law that restricted the bondage of television contracts across multiple residential units. Comparing FY25 and FY24, revenues fell 6%, adjusted EBITDAAL was 12.6% lower and margin hit 2.7% points.
The outlook is also pessimistic.
Vodafone writes down the value of German business at 435 million euros. This is not a cash item, but it reflects it.Management’s latest assessment of potential transactions and economic situations in a five-year business plan”.
Debt fall
However, one area Vodafone has made progress is reducing gear.
On March 31, net debt fell to 22.4 billion euros. Over the year, that’s a reduction of 1.08 billion euros. This is achieved by using revenue from sales in many non-core assets and divisions. It’s impressive, but you need to remember that the group will be much smaller.
However, that debt is now twice the FY25 adjusted EBITDAAL. Deutsche Telekom’s is 2.6 times more.
Perhaps investors will stop using their debts as a stick to defeat Vodafone? There are other weapons available as Germany’s performance has declined and capital returns have not changed.
Final thoughts
I have long argued that Vodafone is underrated compared to his colleagues. And despite the concerns I mentioned above, the results for that 2025 have not changed my view. However, yesterday’s announcement was not sufficient to justify a 7% increase in the group’s market capitalization.
As for valuation, Deutsche Telekom is trading at 14.7 times the latest full-year after-tax revenue, compared to Vodafone’s 11.5 times.
In my opinion, to achieve a higher rating, the group needs to convince investors that they can increase revenues as FTSE 100 companies should. For fiscal year 2014, the forecast for Ebitdaal is 1.1 billion euros. Even at the top, it is a very conservative increase.
After looking back at the results, I will hold my stock. Outside of Germany, the group is fine. Stocks also pay above average dividends.
I don’t know about the stock price reaction yesterday!
