Vodafone Cuts Dividend by 50% to Reduce Debt and Boost Competitiveness

Vodafone Group PLC has announced a 50% dividend cut to free up €1 billion in annual cash flow, aiming to reduce debt and improve competitiveness, as part of its turnaround plan under CEO Margherita Della Valle, with implications for the telecom industry and global economy." This description focuses on the primary topic of Vodafone's dividend cut, the main entity of Vodafone Group PLC and its CEO, the context of the telecom industry and global economy, and the significant action and implications of the decision. The description provides objective and relevant details that will guide the AI in creating an accurate visual representation of the article's content, such as a graph showing Vodafone's dividend history, a image of Margherita Della Valle, or a representation of the telecom industry's competitive landscape.

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Vodafone Cuts Dividend by 50% to Reduce Debt and Boost Competitiveness

Vodafone Cuts Dividend by 50% to Reduce Debt and Boost Competitiveness

Vodafone Group PLC has announced a 50% dividend cut, its first since 2019, in a move to free up €1 billion in annual cash flow. The telecoms giant aims to reduce debt and improve competitiveness with this decision, which led to a 3% rise in shares to 72p.

Why this matters: This move by Vodafone has significant implications for the telecom industry as a whole, as it sets a precedent for other companies to prioritize debt reduction and competitiveness over dividend payouts. The success of Vodafone's turnaround plan could also have a ripple effect on the global economy, influencing investor confidence and market trends.

Under the leadership of CEO Margherita Della Valle, Vodafone is undergoing a significant transformation to return the company to growth. The dividend cut is part of this turnaround plan, with the company set to pay a dividend of 9 euro cents per share for the 2024 fiscal year, targeting 4.5 cents per share "with an ambition to grow over time."

Vodafone reported group revenue of €36.7 billion, with service revenue growing 6.3% organically to €29.9 billion. Underlying cash profit (EBITDAaL) saw organic growth of 2.2%, reaching €11.0 billion, in line with consensus. However, free cash flow fell from €2.6 billion to €1.8 billion, while net debt, excluding the sold segments of Spain and Italy, remained broadly flat at €33.2 billion.

The company is slimming down its European operations, having sold its Spanish business to Zegona for €5 billion and its Italian operations to Swisscom for €8 billion. The proceeds from these deals will be used to buy back up to €4 billion in shares. Vodafone is also pushing for a £15 billion tie-up with Three in the UK, which has been cleared by ministers on national security grounds but still faces an in-depth investigation by competition regulators.

Della Valle emphasized the company's priorities for the year ahead, stating, "We will step up investment in our customer experience, improve our underlying performance in Germany and accelerate our momentum in business, whilst also continuing to simplify our operations throughout the group. We are fundamentally transforming Vodafone for growth." The company has committed an additional €100 million to improving customer experience, including in its call centers.

For financial 2025, Vodafone expects adjusted Ebitdaal to be around €11 billion and adjusted free cash flow to be at least €2.4 billion. The dividend cut is expected to free up €1 billion in annual cash flow, reducing debt and improving competitiveness. As Matt, an equity analyst on the share research team, noted, "We welcome the change, but there's a lot to do."

Key Takeaways

  • Vodafone cuts dividend by 50% to free up €1 billion in annual cash flow.
  • Move aims to reduce debt and improve competitiveness in the telecom industry.
  • Vodafone's turnaround plan includes €100m investment in customer experience.
  • Company expects adjusted Ebitdaal of €11 billion and free cash flow of €2.4 billion in 2025.
  • Dividend cut sets a precedent for other companies to prioritize debt reduction over payouts.