Proactive Investors - Vodafone (LON:VOD) Germany is facing crunch time as analysts and investors alike are keen to understand the company’s strategy for dealing with the challenges of its largest global market.
According to Berenberg analysts, Vodafone Germany’s national roaming contract with 1&1 is expected to bring a positive shift in financial trends in the second half.
However, there is concern over the departure of Philippe Rogge, Vodafone Germany's chief executive, given the “rollercoaster year ahead” for Vodafone’s last major continental outpost.
“One of the main areas of focus at the full-year results (in May) will be Vodafone’s commentary around German cable TV unbundling and how much of the €800m of revenue exposed it expects to retain,” said Berenberg.
“This may make for some sobering financials in the next few quarters in Vodafone’s largest market.”
Following the divestiture of Vodafone Spain (which, as a lossmaker, was an earnings-accretive decision), Berenberg is now guiding the company towards an EBITDAaL of around €12.1 billion and adjusted free cash flow of approximately €2.7 billion for the fiscal year 2024.
It should be noted, though, that these estimates do not factor in the Italian divestiture nor the pending Three merger.
Nonetheless, Vodafone’s valuation discount remains a point of interest.
Berenberg highlighted the company as trading at a significant discount compared to the telecom sector, suggesting a potential value opportunity for investors, underscored by Vodafone's efforts to streamline its operations and focus on markets where it can sustainably generate returns above the cost of capital.
Currently priced at 69p, Berenberg reckons the stock has a fair value at 78p. But make no mistake- with chief executive Margherita Della Valle working under the mandate of simplifying global operations, this price target is hardly in stone.