Vodafone reveals mammoth £6.6bn loss and slashes dividend

Mobile network cuts shareholder payout by 40 per cent as it seeks to deal with mountain of debt while investing in new superfast 5G

Vodafone was recently crowned the worst mobile network in the UK for customer service (AFP)

Vodafone has revealed a mammoth £6.6bn annual loss and has cut shareholder dividends for the first time.

The mobile phone giant slashed its payout by 40 per cent, dealing a blow to millions of investors, as it sought to reduce its mountain of debt.

Vodafone swung to a huge loss from £2.8bn a year earlier, after it wrote down the value of some of its assets and took a hit on the sale of Vodafone India.

In the UK, Vodafone was recently crowned the worst mobile network in the UK for customer service. A survey by Which? rated Vodafone at one star for customer service, value for money and technical support.

Despite picking up the accolade for a seventh successive year, Vodafone has, until now, been one of the FTSE 100’s most reliable dividend payers.

Tuesday’s announcement marks the first time Vodafone has ever cut its shareholder payout and marks a U-turn for boss Nick Read who had pledged to keep up the dividend.

Vodafone is struggling under a £23bn debt pile but at the same time needs to invest heavily in the next generation of mobile networks which promises to link everything from cars to home appliances to the internet.

5G will go live across seven cities in the UK on 3 July, with another 12 cities to follow by the end of the year, Vodafone confirmed on Tuesday.

The company is investing billions in 5G spectrum and will soon finalise an £16bn deal to buy Liberty Global’s cable assets across Europe.

Mr Read, group chief executive of Vodafone, said the group was at a “key point of transformation”.

“To support these goals and to rebuild headroom, the board has made the decision to rebase the dividend, helping us to reduce debt and deliver to the low end of our target range in the next few years,” he said.

Vodafone’s results showed annual revenues fell 6.2 per cent to a lower-than-expected £37.9bn. It said it came under pressure from increased competition in Spain and Italy and saw “headwinds” in South Africa.

The group posted underlying earnings of £12.2bn – up 3.1 per cent on a so-called organic basis and in line with its outlook.

The figures follow Vodafone’s announcement late on Monday that it had sold its New Zealand mobile business for £1.7bn to a consortium of infrastructure investors.

George Salmon, an equity analyst at Hargreaves Lansdown, said: “Telecoms remains one of the most unloved sectors in the market, and these results are a fair indication of why.”

But, he added: “While a dividend cut is never nice for investors, in the context of the many headwinds facing the group, and the impending €19bn (£16.5bn) acquisition of Liberty Global’s German and eastern European cable networks, we think Nick Read’s decision to rebase the dividend is sensible.”

Additional reporting by agencies