Vodafone UK Grow to Nearly Half a Million Home Broadband Users

Mobile operator and ISP Vodafone UK has reported that they added +44,000 new fixed line home broadband customers during the last quarter (Q2 FY19) to total 479,000, which is down from the +52,000 added in the previous quarter to June 2018. Meanwhile their mobile base shrank to 17,055,000 (quarterly fall of -377,000).

It’s been a fairly lively quarter for Vodafone. In-between seeing some of their TV adverts banned (here), the operator has also managed to switch-on their first live 5G wireless broadband technology trials via a commercial grade network (here) and will benefit from being the primary ISP partner on Cityfibre’s £2.5bn roll-out of a 1Gbps Fibre-to-the-Home (FTTH) network to 5 million UK premises by the end of 2024 (here).

Meanwhile it’s good to see that they’ve continued to grow their FTTC (VDSL2) based superfast broadband packages, although they appear to now be suffering from the same market stagnation of older hybrid fibre technologies as other ISPs and growth is slowing. This is particularly notable for Vodafone because they are one of the cheapest ISPs for such services and ordinarily this would drive strong take-up.

Overall UK fixed service revenue still grew 6.2% (Q1: 5.3%) “driven by continued strong momentum in consumer broadband and a return to service revenue growth in business“. Vodafone also confirmed that their new FTTH products with Cityfibre, which went live in Milton Keynes during September 2018 (here), will be rolled out to a further 9 UK cities by early 2019.

We should also point out that the fall in Vodafone’s mobile base mostly reflects prepaid customers, while they actually added +86,000 (net) new contract customers (up from +60K in the previous quarter). On top of that we note that across the EU they now report average Smartphone based 3G / 4G data usage (mobile broadband) of 3.2GB (GigaBytes) per month.

Nick Read, New Group CEO, said:

“Our performance in the majority of our markets has been good during the first half of the year, and we have taken decisive commercial and operational actions to respond to challenging competitive conditions in Italy and Spain. We are on track to reduce net operating expenses for the third year running, and we are confirming the mid-point of our EBITDA guidance range, with an increased outlook for free cash flow generation.

Looking ahead, my new strategic priorities focus on driving greater consistency of commercial execution, accelerating digital transformation, radically simplifying our operating model and generating better returns from our infrastructure assets. Our goal is to deepen customer engagement through a broader offering of products and services and to deliver the best digital customer experience, supported by consistent investment in our leading Gigabit networks. We expect that this will drive revenue growth, reduce churn and lower our European net operating expenses by at least €1.2 billion by FY2021.

As part of our effort to improve returns, we are creating a virtual internal tower company across our European operations, and we are reviewing the best strategic and financial direction for these assets.

Our focus on organic growth along with the strategic and financial benefits of the proposed acquisition of Liberty Global’s assets give confidence in the Group’s ability to grow free cash flow, which underpins our dividend.”

The “virtual internal tower” company mentioned above will become responsible for managing their 58,000 towers (masts) in all of their controlled operations across Europe. “This internal vertical organisation will have a dedicated management team solely focused on adding new tenancies and reducing operating expenses. We are also conducting due diligence in order to determine the optimal strategic and financial direction for all of our tower assets, including those held in joint ventures,” said the operator.

On the financial front they reported quarterly UK service revenues of €1,438m (down slightly from €1,459m last quarter). The full report is here (PDF).