Vodafone's German Struggles Drag Down Third-Quarter Performance

Vodafone Group Plc, the multinational telecommunications company, has reported a decline in its German market performance during the third quarter, which has impacted its overall European operations. The company's struggles in Germany, its largest market, have raised concerns about its long-term strategy and the potential implications for its global business.

Vodafone's German market has been facing challenges due to regulatory changes and intense competition. The new German Telecommunications Act, which came into effect in December 2021, ended automatic renewals for TV services bundled with rent, leading to broadband and TV customer losses. This law change has significantly impacted Vodafone's German operations, contributing to a decline in service revenue. Additionally, price increases in Germany, particularly in mobile and fixed services, may have contributed to customer churn and revenue decline. The company reported a 0.5% decline in organic service revenue growth in Germany in Q2 2022 (Vodafone, 2022).

The decline in Germany's mobile customer net additions and the impact of price actions on service revenue growth suggest that Vodafone may face challenges in maintaining its market share and revenue growth in the region. The company's market share in Germany has been decreasing, with Deutsche Telekom leading the market (Statista, 2021). Vodafone's struggles in Germany contrast with its stronger performance in other European markets, such as the UK, Turkey, and Africa.



Vodafone's strategic response to the German market's challenges has had a notable impact on its overall performance in the third quarter. The company has been actively working to mitigate the effects of the law change, which has led to a decline in service revenue in Germany. However, Vodafone has managed to maintain good growth in service revenue in Europe and Africa, with the company growing in 8 out of 10 markets in Europe and reporting strong service revenue growth in Africa.

In Germany, Vodafone has been impacted by the end of selling TV in bulk to apartment blocks, which has resulted in a decline in service revenue. However, the company has been able to secure around 2.6 million customers under the new teams, and it remains confident that it will keep around half of its TV customer base. Vodafone has also been simplifying its operations and executing on its cost programmes to improve profitability, with the company announcing a further 2,000 role reductions in the first year of a 3-year 11,000 role reduction plan.

The potential long-term implications of Vodafone's recent performance in Germany for its overall European operations and global strategy are significant. Germany is Vodafone's largest market, contributing around 31% of the group's service revenue. A sustained decline in Germany could negatively impact Vodafone's overall European performance and prompt the company to reassess its strategic priorities and resource allocation. The decline in Germany could also lead Vodafone to focus more on growing markets, such as Africa and Turkey, where it has seen strong service revenue growth. This could involve redirecting resources and investments away from mature markets like Germany.

In conclusion, Vodafone's recent performance in Germany has raised concerns about its long-term strategy and the potential implications for its global business. The company's struggles in Germany, its largest market, have impacted its overall European operations and may require a reassessment of its strategic priorities and resource allocation. Vodafone must address the challenges in Germany and maintain its focus on growing markets to ensure its long-term success.