Vodafone Group PLC (LSE:VOD) European business is cited as a lagging factor in the telco’s financial performance, with UBS expecting next week’s fourth quarter update to potentially fall short of expectations.
Altogether, the Swiss bank sees struggles in Germany and, in the UK, disruption due to the ongoing acquisition of the Three unit as headwinds (as the ‘dilutive’ deal is ‘front-heavy’ in terms of capex).
Free cash flow could be short of expectations (consensus is pitched at €2.6 billion) with UBS pencilling in €2.4 billion.
UBS, in a note, revealed it reckons there are signs German service revenue declines may have bottomed in the fourth quarter, and it forecasts a 5.7% year-on-year fall, improving from prior quarters and expects a recovery in FY26.
It expects Vodafone’s German business will see earnings (EBITDA) reduce to €2.06 billion.
At group level, UBS said it expects FY26 earnings to be €11.06 billion, and adjusted free cash flow of €2.44 billion – both estimates are below market consensus, the bank noted.
Looking at the UK business, UBS expects the Three UK merger to contribute over €550 million in earnings, but also weigh on cash flow (to the tune of €200 million).