BT share price meltdown resumes after weak Vodafone earnings

BT Group (LON: BT.A) share price dropped sharply on Tuesday after the relatively mixed results from Vodafone. The stock retreated by over 1.65% as Vodafone plunged by almost 4%. BT shares have crashed by more than

Vodafone, the giant telecommunication company, published mixed financial results. While its growth in Germany resumed, its total profits were modestly weaker than expected. Its adjusted EBITDA came short of expectations in key markets like UK, Italy, and Spain.

In Germany, its biggest market, organic service revenue jumped by 4.7% in Q2 while its total EBITA came in at over 13.3 billion euros. That increase was bigger than the median estimate of 13.2 billion euros. In a statement, an analyst at Bloomberg said:

“Vodafone’s better-than-expected 4.7% organic service-revenue growth in fiscal 2Q shows that the strategic pivot to focus on customer satisfaction and value vs. volume is paying off. The result reflects broad-based acceleration, due to price hikes and better mobile operational performance.”

Therefore, BT share price dropped because of its strong correlation with Vodafone since the two companies offer the same services. The main difference between the two is that BT Group is primarily a UK domestic company while Vodafone does business in many countries around the world.

BT Group published its financial results two weeks ago. Its revenue rose slightly to £10.4 billion, helped by its fibre-enabled product sales. Its EBITDA jumped by 4% while its reported profit before tax jumped by 29% to over £1.1 billion. These results revealed that BT Group was doing well in a difficult market. 

Still, BT stock faces numerous challenges. As I wrote recently, Patrick Drahi, its biggest investor, is facing a cash crunch as his mountain of debt bites. As a result, Altice stock has plunged by over 56% in the past 12 months. 

Drahi is the majority owner of Altice. According to media reports, he needs billions of dollars to cover his upcoming maturities. To do that, he has placed some assets in Portugal and France on sale. It is unclear whether he will dump his BT stake.BT Group is also facing other challenges as the British economy slows. Data published last week revealed that the UK economy ducked a recession in Q3 as it remained stagnant. Still, the cost of living crisis is continuing. Further, the company is seeing minimal and no catalyst for revenue growth.