In early December, my wife and I bought Vodafone Group (LSE: VOD) shares for our family portfolio. We paid an all-in price of 90.2p a share. But the Vodafone share price has ridden a roller coaster since we bought into this business.
Volatile Vodafone shares
I’d hoped that Vodafone stock, as a member of the elite FTSE 100 index, would be a lot less volatile than it proved to be. At first, this popular share set off in the right direction, hitting its 2023 closing high of 102.76p on 20 February. Alas, the share price has fallen fairly persistently since.
Here’s how the Vodafone share price has performed over seven different periods:
| Current price | 83.18p |
| One day | +1.0% |
| Five days | -8.0% |
| One month | -9.6% |
| Year to date | -1.5% |
| Six months | -14.6% |
| One year | -29.7% |
| Five years | -57.1% |
Vodafone shares have lost value over six periods, ranging from five days to five years. They have dived by almost three-tenths over 12 months and crashed by more than half over half a decade. Ouch.
Of course, historic share prices only show us what happened in the past, not the future. So does £22.5bn Vodafone’s fortune look glowing or grim?
New boss, new direction
The first thing I’d note is that the telecoms group has a new CEO. Margherita della Valle was appointed interim chief after former CEO Nick Read departed at end-2022. She became permanent boss on 27 April.
That said, della Valle is hardly new to the business. She has worked for Vodafone since 1994 and was chief financial officer before taking the top job. Thus, she is far more of an old hand than a new broom.
As is traditional with new CEOs, della Valle is taking an axe to the group’s costs. On Tuesday (16 May), she announced that Vodafone will cut 11,000 jobs worldwide over the next three years. This works out at around one in eight of the company’s 90,000-strong workforce.
Della Valle also warned, “Our performance has not been good enough. To consistently deliver, Vodafone must change. My priorities are customers, simplicity and growth”. She aims to use £250m of cost cuts to improve customer service and brand value.
What next?
The new boss has recognised the group’s past failings and is enacting an aggressive plan to address them. But what if it fails to work?
One problem is that Vodafone has €33.4bn of net debt weighing down its balance sheet. Then again, this is down from €41.6bn in the prior financial year.
Another problem is that Vodafone’s revenues rose by only 0.3% in the past financial year and have basically flatlined over the last 10 years.
What would I do to turn around this telecoms tanker? To further reduce debt and improve operating performance, I would sell assets and exit certain markets (perhaps Italy and Spain?). I would then concentrate on major markets, namely Germany and the UK.
Will my wife and I sell our Vodafone shares right now? No, because they offer a whopping dividend yield of over 9.4% a year. However, I fully expect this to be cut in the near term.
Summing up, I don’t feel foolish to have bought this stock, but I won’t hesitate to sell it if another round of bad news arrives!
