In the six months ending 30 September, revenues fell 4.9 per cent, not taking into account the sale of the company’s stake in Verizon Wireless.
The results were even worse in southern Europe, where the company saw revenue fall 15.5 per cent. Central and northern European revenues, which includes Germany, where new acquisition Kabel Deutschland operates, fell 3.9 per cent.
However, shares recovered quickly from the news and had almost retraced their losses at the open of trading on Thursday.
Performance of stock vs index Mon - Thurs
Source: FE Analytics
There are a number of reasons investors are keen on the shares, the first being their dividends.
Capita Asset Services’ Justin Cooper (pictured) says next year could be very good for income-seekers holding Vodafone.
"Vodafone is the one to watch for income investors," he said. "Its latest interim dividend of £1.9bn (gross) is up 8 per cent, well ahead of the market.""Even without its even larger final payment, that would be big enough to put Vodafone in the top-10 of all UK payers."
The stock goes ex-dividend on 20 November, however, so investors need to keep this in mind when planning their entry.
"On top of all of that, the mobile phone giant is set to make the UK’s largest ever dividend payout to investors next year with a £16.6bn special dividend, taking the total paid out by UK firms next year over £100bn for the first time, up from less than £80bn this year," he added.
Out of the 98 funds in the IMA UK Equity income sector, 64 hold the stock in their top 10. Standard Life UK Equity High Income has 7.5 per cent of its assets in the company, while Kames UK Equity Income has 7.3 per cent.
Source: FE Analytics
However, there are other reasons to be optimistic about the stock. The company is currently engaged in what it calls “Project Spring”, using some of the proceeds from the sale of Verizon Wireless to improve its existing hardware.
The company will invest £7bn in fibre-optic cables and other equipment to improve its market position in Europe.
Up to £3bn of the money will be spent broadening the reach of 3G services and building a 4G network in an attempt to get ahead of its competitors in Europe.
A smaller portion of the money will be spent in newer markets of Africa, the Middle East and Asia Pacific [AMAP], the only region in which the company experienced growth in its most recent report.
Revenue in AMAP grew 5.8 per cent on the previous year in the quarter ending 30 September, and the company plans to spend £1.5bn to extend 3G coverage.
Despite this expenditure, the company remains centred on Europe, and has said that organic growth rather than new acquisitions is the way forward.
Its acquisition of Kabel Deutschland underlined its commitment to the beleaguered continent; 71 per cent of the group’s revenues come from that region as a whole.
Opinions still differ on the outlook for the region, and while some are optimistic that a corner has been turned, plenty of analysts highlight that there are still serious problems within the eurozone, and southern European countries are still suffering under a monetary policy not designed for them.
Nonetheless, the improving situation in Europe reduces the likelihood of the tail risks for the company.
And if the recovery proves to be lasting, the company will reap the benefits of sticking with the region through years of crisis.
Vodafone sold out of Japan and China in 2010 to focus on its core markets. It retains significant exposure to India, however, as well as Africa.
The company is increasingly confident that this strategy will pay off.
Performance of stock vs index over 5yrs
Source: FE Analytics
Joe Rundle, head of trading at ETX Capital, said: "Europe remains challenging for the company, particularly the peripheral nations, but management are somewhat optimistic on the economic outlook over the next two years."
The other reason to be optimistic about Vodafone is the takeover rumour. All market rumours have to be taken with a pinch of salt, but there has been persistent talk that AT&T could end up making an approach for Vodafone.
"In recent days, there has been talk of AT&T looking to Vodafone as a candidate although there has been no comment by Vodafone management today [Tuesday] – however the success of Project Spring may just be enough to convince AT&T to make a move," Rundle said.
AT&T is also considering an approach for rival EE, however, according to sources speaking anonymously to Bloomberg.
Fund managers are always keen to say they don’t invest in stocks on the expectation they are going to be taken over, as it is seen as speculative rather than serious investing.
Nonetheless, any takeover would be expected to be very good for Vodafone investors. It would also create the world’s largest mobile phone company by revenues.
Vodafone looks attractive for income and for dependable growth.
