Vodafone cuts dividend amid falling revenue

Bloomberg

Vodafone Group Plc’s dividend has cracked under the strain of falling revenue, soaring spectrum costs and a $21 billion acquisition, in a grim reality check for Europe’s struggling phone industry.
The region’s biggest telecom carrier slashed its full-year dividend by 40% to 9 euro cents per share, reversing Chief Executive Officer Nick Read’s goal to keep the payout unchanged. It was the first cut since the company introduced dividend payments in 1990.
The move allows Read to conserve cash as sales in major markets come under sustained attack from rivals offering no-frills contracts and former monopolies reasserting themse- lves with dominant networks. Vodafone is gearing up to spend billions of euros on mobile-network upgrades and the airwaves needed for the next generation of ultra-fast wireless services.
Vodafone’s organic service revenue fell 0.6% in the fourth quarter from a year earlier, versus the 0.7% drop forecast by analysts in a company-compiled consensus, as sales declines worsened in Italy and Spain. The measure strips out the impact of merger and acquisition activity and currency fluctuations to present performa- nce on a comparable basis.
Vodafone cut dividend beca-use of lower revenue forecasts, costly auctions of mobile spectrum and risks such as global trade tensions and Brexit, Read told reporters on a call.
“There could be further downsides ahead of us” and “on that basis you want to make sure you have sufficient headroom,” he said.
The company is aiming to return to revenue growth by the July-to-September quarter as it accelerates a digital overhaul, simplifies its operations, generates better returns from its infrastructure and continues to sell assets. Shares in Vodafone, Europe’s biggest phone carrier by regional sales, were up 2.9% in London, recovering from a sharp drop in early trading.
“As Vodafone reaffirms its midterm ambitions for cash-flow growth, the dividend can rise materially after the peak of auction spending,” said Erhan Gurses, Telecom analyst.
With Europe’s phone companies fighting for customers with steep discounts and all-you-can-eat data packages, revenue growth has been elusive and share prices have tumbled, leaving reliable dividend payouts as the remaining bright spot for investors. Now even those are in doubt for some carriers as the heavy cost of 5G mobile networks becomes clear. Speculation that British rival BT Group Plc will cut its payout hasn’t gone away since new CEO Philip Jansen maintained a flat payout last week even as profits decline and spending commitments grow.