Shares of Vodafone (NASDAQ:VOD) fell in London on Monday despite the telecommunications company surpassing sales expectations for Q3.
Instead, investors reacted to revenue headwinds caused by cable television regulation in Germany and the unsuccessful merger of its Italian business.
The telecom operator reported organic service revenue growth of 4.7% for the quarter, compared to 1.8% growth in the year-ago period and better than the 4.2% estimated by analysts.
In Germany, Vodafone experienced a modest increase in organic service revenue, up by 0.3%, which was a significant improvement from the previous year's decline of 1.8%, albeit slightly below the estimate of 0.39%.
In Italy, Vodafone’s organic service revenue growth stood at -1.3%, from -3.3% year-on-year, and outperforming the anticipated -1.46% estimate. The UK market continued to be a strong performer with organic service revenue growth of 5.2%, nearly matching the previous year's 5.3% and beating the estimate of 4.69%.
Spain showed signs of recovery with a -1.1% change in organic service revenue, a marked improvement from the -8.7% witnessed a year ago, and significantly better than the -2.53% estimate. Other European markets contributed positively with a 3.6% growth in organic service revenue, up from 2.1% the previous year, though slightly below the expected 4.02%.
Vodacom, part of Vodafone's portfolio, outperformed expectations with an 8.8% growth in organic service revenue, above the 7.64% estimate.
Overall, service revenue in the EU amounted to 9.38 billion EUR, a decrease of 1.4% year-on-year, but still ahead of the forecasted 9.31 billion EUR.
Looking ahead, the company expects to hit 13.3 billion EUR in adjusted EBITDA for the whole year, beating the consensus projection of 13.12 billion EUR. Adjusted free cash flow is anticipated to be around 3.3 billion EUR>
“Our announced transactions in the UK and Spain are progressing well, and we are in active discussions in Italy,” the company said.
“We maintained good service revenue momentum in the third quarter across both Europe and Africa, supported by a further acceleration of Vodafone Business, with our Cloud and Internet of Things services growing over 20%.”