While most European countries experienced lockdowns of varying degrees of severity and social contact was by necessity, long-distance due to covid, telecoms giant Vodafone saw a return to profit, despite a marked decline in income from sales of new handsets and roaming charges.
With travel at a fraction of what it was for the same period last year, UK-based Vodafone’s revenue dropped by 2.3% for the first half of 2020.
This fall comes on the back of a significant overhaul at Vodafone’s operations over the last two years, and revenue growth had been projected for 2020. The lockdowns put in place across Europe against the spread of Covid-19 meant far fewer people traveled and far lower revenue from roaming.
Traditionally, the summer months see a significant hike in the sale of new handsets with a corresponding rise in contract revenues for new connections and plans. That wasn’t the case this time around.
That was reasonably predictable. If you’re in the middle of a pandemic, probably the last thing on your mind is a new mobile phone!
The company had expected to see a rise in roaming charges in the first half of the year. According to Vodafone Chief Executive Nick Read:
“Covid-19 and the reduction in roaming revenues, through the significant reduction in international travel, is currently obscuring our underlying commercial progress, with quarter two service revenue growing by 1.5 percent excluding roaming.”
The results of the restructuring program the company has put in place over the last two years make for a stark improvement, with the company reporting a pre-tax profit of €2bn for the first six months of 2020, compared to a loss of €511m for the same period last year.
Reported EBITDA (Earnings Before Interest, Taxation, Depreciation, and Amortization) came in at €7bn, slightly above analyst expectations. The take-away here is Vodafone did well, but not as good as it might have done.
Telecoms as a sector showed remarkable resilience in the face of continued lockdowns, apart from the detrimental effects of reduced roaming with Spain and the United Kingdom underpinning results for Vodafone in particular.
While the effects of the pandemic have taken a toll on the industry as a whole, like the old British Telecoms ads used to say, “let your fingers do the walking”. People need to communicate, and Vodafone is in the communications business.
Early trading saw Vodafone shares up 3.5 percent on the news.
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