Vodafone Group Reports 5.2% Organic Service Revenue Growth in Q1 FY27, Raises Full-Year Guidance Following Safaricom Consolidation

Broad-Based Service Revenue Growth Across Regions

Vodafone achieved 5.2% organic service revenue growth in Q1 FY27, with all four geographic segments contributing. Total reported service revenue increased 9.8% to 8.6 billion, boosted by Three UK consolidation after the May 2025 merger, though organic figures exclude acquisition effects. Operating in competitive Western European and rapidly expanding African markets, Vodafone saw varying regional demand dynamics.

Germany, accounting for 32% of Group service revenue, posted 1.2% organic growth to 2.7 billion, improving from 1.3% in the previous quarter. The UK, representing 23% of service revenue, reversed a 0.2% decline in Q4 with 0.6% organic growth. Notably, the UK's fixed service revenue surged 6.1% organically, driven by strong broadband and business service demand. Africa led growth with 12.6% organic service revenue increase, up from 10.9% in Q4, fueled by connectivity and financial services growth in Egypt and Vodacom’s international markets.

Acceleration in Business Digital Services Segment

Vodafone's Business segment accelerated to 5.0% organic service revenue growth in Q1 from 3.2% in Q4 FY26, propelled by robust demand for SaaS, IoT, cloud, and security solutions delivering high double-digit growth. Investments in specialist sales teams, expanded digital capabilities, and a strong enterprise pipeline contributed to this momentum.

In Germany, Business service revenue grew 7.2% reported and 4.0% organically, up from 1.5% last quarter, with digital solutions offsetting mobile connectivity pressures. The UK business faced challenges from contract renewals and ARPU pressure but benefited from growth in SDN, SaaS, and digital communications. Other Europe saw Business revenue rise 4.2% reported and 4.0% organically, supported by public sector digital projects in Greece and Ireland.

Germany’s Market Trends and Fibre Expansion

Competitive pressure in Germany’s mobile segment limited mobile service revenue growth to 1.2% reported. However, fixed service revenue increased 2.6% reported and 1.3% organically, driven by Consumer broadband ARPU gains and Business digital services growth. Broadband ARPU for new customers rose 30% year-over-year following value-focused pricing actions from March 2025 to January 2026.

Vodafone’s OXG fibre joint venture advanced, passing 840,000 homes and marketing to over 1.5 million. Vodafone remains Germany’s largest fixed gigabit connectivity provider, offering gigabit speeds to nearly 75% of homes. In May 2026, a strategic partnership with Deutsche GigaNetz GmbH expanded fixed coverage to over 500,000 households, with potential to reach one million by 2030. The January 2026 launch of the 'Ask Once' customer service initiative reduced detractor share by 20% in its initial rollout.

Progress in VodafoneThree Integration and UK Market

The UK market showed positive momentum, with organic service revenue growth turning 0.6% after a 0.2% decline in Q4. Fixed service revenue grew 6.1% organically, driven by Consumer broadband and Business fixed services recovering after prior contract terminations. Mobile service revenue declined 0.7% organically due to ARPU pressure and contract renewals, partially offset by wholesale revenue gains.

VodafoneThree integration, following the May 2025 Three UK merger, is ahead of schedule. Network sharing has exceeded targets, enabling seamless cross-network access and a 50% improvement in Vodafone 5G download speeds. Approximately 70% of the UK population (50 million people) now access VodafoneThree 5G via spectrum sharing. In May 2026, Vodafone agreed to a a34.3 billion (4.9 billion) buyout of CK Hutchison Group Telecom Holding Limited’s stake, making Vodafone sole owner upon completion. Management projects a3700 million in annual cost and capex synergies by FY30 and will host an investor briefing on 8 October 2026 to outline strategy.

Robust Double-Digit Growth in Africa

Africa remained Vodafone’s fastest-growing region with 12.6% organic service revenue growth in Q1, up from 10.9% in Q4. Reported service revenue reached 1.8 billion, or 21% of Group total. Growth was driven by Egypt and Vodacom’s international operations across connectivity and financial services. The region benefits from rising mobile penetration, expanding data usage, and growing mobile financial services adoption.

The Safaricom transaction, completed 30 June 2026, significantly expanded Vodafone’s African footprint. Vodacom’s acquisition of an additional 20% stake raised Group and Vodacom ownership to 55%, with full consolidation effective 1 July 2026. The nine-month FY27 Safaricom consolidation adds 1.1 billion to Adjusted EBITDAaL with no impact on Adjusted free cash flow, supporting management’s confidence in achieving upper-end guidance.

Safaricom Deal Finalization and Revised FY27 Outlook

Safaricom acquisition marks a strategic milestone, broadening Vodafone’s presence in East Africa by adding Kenya and Ethiopia operations. Kenya represents a large, growing mobile market; Ethiopia offers long-term growth potential. Updated FY27 guidance, announced May 2026, incorporates nine months of Safaricom consolidation.

Revised FY27 guidance forecasts Group Adjusted EBITDAaL of 13.013.3 billion and Adjusted free cash flow of 2.62.9 billion, up from original ranges of 11.912.2 billion EBITDAaL. The 1.1 billion EBITDAaL uplift is solely due to Safaricom consolidation, which has no free cash flow impact. Management expects to reach the upper end of guidance, backed by strong Q1 results and ongoing cost efficiency efforts.

Adjusted EBITDAaL Growth and Margin Expansion

Adjusted EBITDAaL rose 6.7% reported to 2.9 billion in Q1, with 6.2% organic growth surpassing service revenue growth of 5.2%, indicating operational leverage. Organic margin improved 0.6 percentage points to 28.5%, reflecting revenue growth and benefits from cost efficiency and synergy programs. This margin expansion shows Vodafone’s ability to convert revenue gains into profitability through disciplined management.

Europe segment contributed 1.7 billion Adjusted EBITDAaL with a 28.5% organic margin. Medium-term Europe guidance targets 7.67.9 billion Adjusted EBITDAaL for FY27, with expected contribution near 7.77.8 billion. FY27 restructuring and integration costs are projected to peak at 0.7 billion, including 0.4 billion related to VodafoneThree merger integration.

Customer Trends Across Markets

Vodafone’s customer metrics reflect competitive pressures and value-optimization strategies. In Germany, mobile contract customers declined by 85,000 in Q1, consistent with prior trends, while branded Consumer base remained stable due to improved propositions and experience. The company added 2.9 million IoT devices, driven by automotive and enterprise demand. Broadband customers declined by 98,000, reflecting focus on ARPU growth and value.

In the UK, mobile contract customers decreased by 48,000, including 25,000 low-value Business SIM disconnections. Consumer contract churn improved by 1.0 percentage point year-over-year, supported by strong customer experience. Prepaid brands VOXI and SMARTY gained 34,000 customers. Broadband additions totaled 34,000, including 23,000 fixed wireless access subscribers. Vodafone marketed gigabit speeds to 24.5 million households via partnerships and launched a new FWA 5G product covering 3.7 million homes outside fibre footprint in May 2026.

Cost Efficiency and Synergy Initiatives Delivering Results

Vodafone’s multi-year cost efficiency and synergy programs, announced May 2026, are showing tangible benefits in Q1. The company identified 2 billion gross efficiency and synergy potential, targeting 1 billion net European opex reductions from FY27 to FY30. Europe and Shared Operations reduced over 1,200 roles in Q1, with UK integration synergies materially impacting operations. Management expects significant net opex savings by FY27 end, supporting operational leverage and free cash flow growth.

Focus on simplicity and reduced complexity has accelerated decision-making and cost control. The 'Ask Once' customer service initiative, launched in Germany in January 2026, cut customer detractor share by 20%. Net promoter scores improved in 13 of 14 markets, enabling shift from detractor reduction to promoter growth, bolstering customer retention and cost efficiency.

Medium-Term Strategy and Capital Allocation Priorities

Vodafone’s medium-term financial ambitions align with strategic priorities across Europe, Africa, B2B, and Investments. Group revenue growth is supported by European value discipline, African growth with early-teens Adjusted EBITDAaL CAGR, and B2B digital services momentum. FY26 Group Adjusted EBITDAaL margin of 28.1% provides a foundation for expansion, with management targeting an 18% improvement in capital intensity and maintaining approximately 3% cost of debt while aiming for the lower half of 2.252.75x Adjusted EBITDAaL-to-net-debt leverage.

Disciplined capital allocation remains key, with double-digit organic Adjusted free cash flow growth expected to translate into absolute euro growth. Stable capital intensity is targeted market-by-market, enabling financial flexibility for shareholder returns and debt reduction. Safaricom consolidation’s contribution to EBITDAaL without free cash flow impact highlights acquisition quality and strategic fit.

Portfolio Updates and Strategic Collaborations

During Q1, Vodafone enhanced its portfolio and competitive positioning. In October 2025, it completed acquisition of Telekom Romania Mobile Communications S.A. (TKRM), expanding Romanian mobile operations. Integration progressed well, migrating over 380,000 customers to Vodafone contracts and combining 500+ radio sites.

In Greece, Vodafone and Public Power Corporation S.A. (PPC Group) agreed heads of terms in June 2026 for a 50:50 joint venture combining fibre-to-the-home networks and wholesale fibre businesses, covering 1.6 million homes combined. The joint venture is subject to due diligence, binding agreements, and regulatory approvals, aiming to consolidate fixed infrastructure and unlock wholesale open access for ISPs. These partnerships strengthen Vodafone’s converged telecom leadership with enhanced fibre and wholesale capabilities.