Citi rings the changes at Vodafone

Citi has thrown its weight behind Vodafone, despite the problems the telecoms giant is facing in India, pointing instead to improving European earnings.

Citi, which has a ‘buy’ recommendation on the London-listed stock and a price target of 185.0p, said: “We see ongoing improvement in service revenue growth from the fourth quarter onwards, and on a better quality mix: Europe is set to drive the recovery, while Turkey/Egypt should slow down.”

Analysts Georgios Ierodiaconou and Rohit Modi continued: “Shame the market doesn’t seem to focus on EBITDA – with €400m of annual savings coming from digitalisation and other savings on top, Vodafone EBITDA growth is well supported in the coming interims [and] years.

“Yes, group EBITDA can have contributions from [emerging markets], and that can be skewed by inflation and lost in translation. But focusing on Europe, we expect around 3.5% EBITDA growth in the company years.”

In November, Vodafone – which last summer acquired German and Eastern European Liberty Global in a €22bn deal – reported narrowed interim pre-tax losses of €511.0m, compared to a €2.8bn loss a year earlier. Turnover was flat at €21.9bn.

The company has been hit by problems in its India joint venture, Vodafone Idea, which is facing an uncertain future after a Supreme Court ruled it must pay retrospective penalties of $4bn. Vodafone has a 45% stake in Vodafone Idea, which has around 300m users.

Shares in Vodafone were ahead nearly 1% at 148.24p by 1400 GMT.