It’s exhausting to consider that Vodafone (LSE:VOD) shares had been as soon as altering palms for almost £5.50 simply after the flip of the millennium. Immediately, the FTSE 100 telecoms inventory is a shadow of its former self, with the share price languishing under 70p.

Following an 18-month Competitors and Markets Authority (CMA) investigation, the corporate secured long-awaited regulatory approval for a merger with rival agency Three UK in December final 12 months. The three way partnership is predicted to return on stream imminently.

However, how has this information impacted affected person long-term traders in Vodafone shares, who’ve endured substantial losses?

Six-month efficiency

Again in October 2024, a £10,000 funding in Vodafone might have purchased 13,329 shares. Sadly, information of the merger approval appears to have had little impact on the inventory’s downward trajectory. That holding would solely be price £9,250 right this moment.

At the least an interim dividend cost of £251.39 would have softened the blow considerably. However traders would nonetheless be almost £500 within the purple. To make issues worse, that distribution marked a huge 50% minimize from the identical interval final 12 months. An uncomfortable reminder that no dividends are assured.

Share price restoration hopes

Frankly, lots is driving on the merger with Three. Little else appears to be going proper for Vodafone presently. Service income development in Europe is stagnant, dragged down by a very poor efficiency within the essential German market — the supply of over a 3rd of the group’s gross sales.

Authorized adjustments have ended bulk tv contracting in German house blocks. That’s an enormous issue behind Vodafone’s 6.4% service income hunch within the jurisdiction. Amongst households caught by the brand new legislation, the corporate has misplaced over half of its prospects.

The steadiness sheet is one other large concern. Web debt of £26.4bn is an uncomfortably excessive legal responsibility for an organization with a market cap that’s £9.2bn lower than this determine. It’s little marvel the group has resorted to dividend cuts, in addition to promoting off its Spanish and Italian companies.

On the brilliant facet, development in Türkiye and Africa is accelerating. These markets might show more and more vital for a restoration within the Vodafone share price — if one is to materialise in any respect. Nearer to house, it’s good to see revenues are additionally recovering within the UK, which is accountable for almost a fifth of complete gross sales.

After which we come again to the merger. The mixed entity will boast 27m prospects, making it Britain’s largest cellular community. In concept, that ought to present the group with vital economies of scale and improved effectivity. Moreover, reported plans for the launch of a TV service might help buyer retention figures. So, there’s some room for optimism.

I’m not satisfied

Nonetheless, I don’t suppose the merger is adequate to assuage my basic issues in regards to the well being of Vodafone’s enterprise. It’s a debt-heavy enterprise that’s shedding thousands and thousands of shoppers in a core market. To make issues worse, chunky dividend cuts considerably cut back the inventory’s passive revenue attraction.

Traders in Vodafone shares will undoubtedly hope the following six months are extra optimistic. Their religion could also be validated, however I received’t be becoming a member of their firm for now. Total, I feel loads of different FTSE 100 shares have a extra compelling funding case right this moment.