Vodafone’s dividend could be at risk after some of its markets were buffeted by economic turmoil and rampant inflation.
The telecoms giant operates in several countries that have seen a surge in prices, including Turkey and Egypt.
While the FTSE 100 firm currently has enough money to cover its dividend bill – £2.2 billion last year – the situation was ‘not as comfortable as it appears’, according to highly respected telecoms research firm Enders Analysis.
Economic turmoil: Vodafone operates in several countries that have seen a surge in prices
High inflation in some countries where Vodafone operates means that money made there rapidly loses its value and this could eat into its £5.1 billion cash pile. Inflation in Turkey is a staggering 57.7 per cent.
Vodafone is trying to streamline its operations and reduce its massive debt, which last year stood at £36.7 billion. The strategy includes the £1.5 billion sale of the group’s Hungary business in January.
A report from Enders said Vodafone would be ‘exposed’ to inflation-linked payments connected to its £6.2 billion Vantage Towers deal struck in November.
The report warned these higher costs would put ‘enduring pressure’ on earnings and cash flow that are on a ‘downward trajectory’.
It added that a fibre internet joint venture in Germany with French telecoms firm Altice could require Vodafone to make payments equal to 10 per cent of its revenues.
The assessment will be another blow to investors after the dividend was slashed by 40 per cent in 2019.
Vodafone declined to comment.
