Income-hungry investors worried about upheaval in the U.S. telecom market should cast their eyes across the Atlantic. The fat dividends paid by European mobile leader
look secure, and could even grow.
The challenges now facing
—fierce competition from budget mobile operators and the convergence of telephony with broadband and TV—have dogged the European market for some years. Vodafone, whose shares trade as American depository receipts on the
responded by investing heavily both in its 4G network and a series of small cable companies. It could afford to because in 2014 it sold its stake in Verizon Wireless to the eponymous majority owner for some $130 billion.
Thanks to these investments, Vodafone on Tuesday reported solid results for three of its four big European markets in the year through March. The exception was the U.K., where performance has been hit by local billing problems. The logic of a deal with the local cable arm of
remains as clear as ever, but there is no hint of a breakthrough here. Previous talks have broken down due to disagreements over price, and recent operational stumbles on both sides—Liberty Global cut key U.K. growth targets this month—may not make these easier to resolve.
The other problem market is India. Aggressive new entrant Reliance Jio forced Vodafone to slash prices and form a joint venture with rival operator
Yet the big picture is that Vodafone is sufficiently diversified that such local challenges don’t throw the business completely off course. Even including a collapse in India, adjusted earnings before interest, taxes, amortization and depreciation rose 2.5% year over year for the six months through March, and a tripling in cash flows underpinned the dividend.
Vodafone has found ways to eke growth out of the ultracompetitive, converging landscape with which U.S. telecoms are now grappling.
Write to Stephen Wilmot at firstname.lastname@example.org