Vodafone Group: Becoming an EM telco, downgrade to Underperform

Research evidence excerpt

Vodafone Group: Becoming an EM telco, downgrade to Underperform

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Vodafone Group

Becoming an EM telco, downgrade to

Underperform

Rating Change: UNDERPERFORM | PO: 98.00 GBp | Price: 111.35 GBp

Vodafone’s mix has shifted, valuation has not 26 May 2026

Including 100% Safaricom from FY Mar-28, Vodafone (VOD) moves to c55% cash flow Equity

from emerging market operations, including the hyperinflationary market of Türkiye.

This mix is unlikely to rebalance anytime soon as UK growth is offset by elevated capex,

Key ChangesGerman EBITDAaL declines, and growth in Africa remains strong. We argue this supports

a de-rating of VOD’s multiple while we also maintain our view that Germany could yet (EUR) Previous Current

require significant inorganic investment to maintain scale and a competitive stance. Inv. Opinion A-2-7 A-3-7

Move to Underperform (prev. Neutral), PO 98p (prev: 115p), ADR $13.13 ($15.55). Inv. Rating NEUTRAL UNDERPERFORM

Price Obj. 115.00p 98.00p

Mix shift supports a de-rating vs peers 2027E Rev (m) 41,577.5 44,136.6

By FY Mar-28, Vodafone’s EBITDAaL mix shifts to 56:44 developed-market/emerging- 2028E Rev (m) 42,310.4 45,844.2

market (from 67:33 in FY26), driven by full Safaricom consolidation and a structurally 2029E Rev (m) 43,362.1 46,965.9

weaker Germany, only partly offset by UK growth. However structurally higher UK and 2027E EPS 0.08 0.10

German capital intensity flips the cash flow mix to EM-weighted, 45:55 DM/EM. This 2028E EPS 0.10 0.15

compares to peers Orange (Africa) at 70:30 and Telefonica (Brazil) 54:46. On top, exposure 2029E EPS 0.12 0.19

to hyperinflationary Türkiye adds further opacity to forecasting. Applying prevailing EM

cash flow multiples implies VOD should trade at a >1x discount to these peers on David Wright >>